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Edited version of your private ruling
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Ruling
Subject: Capital gains tax - deceased estate - inclusion of costs in cost base
Question: Can you include the costs incurred in defending the deceased's Will in the Supreme Court under the fifth element of the cost base?
Answer: Yes.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You as the trustee of a deceased person's estate (the deceased) have previously sought and received a private ruling on the capital gains tax (CGT) consequences in relation to the disposal of the deceased's main residence.
You incurred substantial costs in defending and upholding the deceased's Will.
The legal costs were incurred to defend against one of the deceased's children challenging the Will regarding the distribution of the deceased's main residence.
The matter was dealt with in the Supreme Court of an Australian state.
The proceeds from the disposal of the deceased's main residence are subject to CGT.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 110-25.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Cost Base
The cost base of a CGT asset consists of five elements:
· money or property given for the asset
· incidental costs of acquiring the CGT asset or that relate to the CGT event
· costs of owning the asset
· capital costs to increase or preserve assets value or to install or move it, and
· capital costs of preserving or defending your ownership of or rights to your asset.
In your case, you incurred substantial legal costs in defending and upholding your ownership interest as the trustee under the deceased's Will in the Supreme Court of an Australian state.
Therefore, these costs can be included under the fifth element of the cost base.