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Edited version of private ruling
Authorisation Number: 1011769034729
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Ruling
Subject: Capital gains tax - inherited property
Question
Will you be exempt from capital gains tax on the sale of the inherited property?
Answers
No.
This ruling applies for the following period
Year ended 30 June 2011.
The scheme commenced on
1 July 2010.
Relevant facts
You inherited a dwelling that was the main residence of the deceased.
You sold the inherited property X years after the deceased death.
You did not live in the property after inheriting it.
The property has not been used to produce assessable income since you inherited it.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Section 104-10
Income Tax Assessment Act 1997 - Section 118-195
Reasons for decision
Sale of the deceased's main residence that you inherited
You disregard any capital gain or capital loss you make when a CGT event happens to the dwelling or your ownership interest in the dwelling if:
· One of the conditions 1 or 2 below is met, and the dwelling passed to you as a beneficiary or trustee, and just before the date the deceased died it was their main residence and was not being used to produce income.
Condition 1
You disposed of your ownership interest within X years of the person's death - that is, if the dwelling was sold under a contract and settlement occurred within X years. This exemption applies whether or not you used the dwelling as your main residence or to produce income during the X-year period.
Note: The ATO has no discretion to extend this X-year period.
OR
Condition 2
From the deceased's death until you disposed of your ownership interest, the dwelling was not used to produce income and was the main residence of one or more of:
· a person who was the spouse of the deceased immediately before the deceased's death. (but not a spouse who was permanently separated from the deceased)
· an individual who had a right to occupy the home under the deceased's will, or
· you, as a beneficiary, if you disposed of the dwelling as a beneficiary.
In this case condition one would not be met as you sold the inherited property more than X years after the deceased's death. Condition two would not be met as you did not use the inherited property as your main residence at any time before you sold the property. As the above conditions have not been met you will not be exempt from capital gains tax for your ownership interest on the sale of the inherited property.