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Edited version of private ruling
Authorisation Number: 1011795717439
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Ruling
Subject: CGT - Acquisition and Disposal
Question 1
Can you include legal fees for the breach of agreement by person B to transfer 50% of their ownership interest in the block of land to you?
Answer: Yes
Question 2
Are the conveyance cost, formal valuation fees, stamp duty and or land fee incurred in purchasing person B's portion of the land added to the calculation of your cost base?
Answer: Yes
Question 3
Can you add your share of bills and fees paid such as body corporate fees, rates, state revenue land tax, water and fencing since the time you purchased the land to the cost base?
Answer: Yes
This ruling applies for the following period:
Year ending 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
Your spouse purchased a block of vacant land in 2001 as joint owners with person B.
An agreement was made approximately late 2008 or early 2009 whereby person B agreed to transfer their ownership interest in the block of land to you.
You and your spouse paid for conveyance and formal valuation fees to proceed with the transfer of the title.
Person B breached the original agreement and therefore you and your spouse sought legal representation in order to complete the purchase of the land.
In 2010 person B sold their portion of 50% ownership to you.
You maintained your 50% ownership.
You and your spouse paid stamp duty and or Land fees during the process of purchasing persons B's portion of the land.
The block of land is a subdivision within a development. This is maintained by Body Corporate.
You and your spouse have paid for body corporate fees, rates, land tax and for water and fencing costs.
The block of land was never used for income producing purpose.
Within 12 months of the transfer of title from person B to your spouse, you will sell the block of land.
Reasons for decision
The cost base of a CGT asset is made up of 5 elements.
The five elements of a cost base are:
First element - Money or property given for the asset.
This is money paid or the market value of the property at the time of acquisition.
Second element - Incidental costs of acquiring the CGT asset or that relate to the CGT event.
Incidental costs that may be incurred are at the time of acquisition or in relation to the disposal. Some of these are:
· Remuneration for services of a surveyor, valuer, accountant, broker, consultant or legal adviser
· Cost of transfer
· Stamp duty or other similar duty
· Cost of advertising or marketing to find a seller or buyer.
· Cost relating to the making of any valuation or apportionment to determine your capital gain or loss
· Title search fee
Third element - Cost of owning the asset
The cost of owning an asset includes rates, land taxes, repairs and insurance premiums. You do not include such costs if you acquired the asset before 21 August 1991. Nor do you include them if you have claimed a tax deduction for them in any income year.
Fourth element - capital costs to increase or preserve the value of your asset or to install or move it.
This is the capital cost that you have incurred for the purpose of increasing or preserving the assets value such as installations.
Fifth element - capital costs of preserving or defending your ownership of or rights to your asset
This includes capital expenses you incur to preserve or defend your ownership of or rights to the asset.
Conveyance cost, formal valuation fees, stamp duty and or land fees you incurred are incidental costs that are incurred in the process of acquisition and therefore fall within the second element of the cost base.
Legal fees paid associated with the breach of contract by person B also fall under the second element.
Body corporate fees, rates and land tax are costs relating to owning an asset and are therefore claimable under the third element.