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Edited version of your private ruling
Authorisation Number: 1012069399026
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Ruling
Subject : Cost Base of Shares
Question and Answer
1. Is the cost base of the shares initially acquired by the taxpayer's relative the market value at the date of your second parent's death?
No.
2. Was the purchase price of shares $X?
Yes.
This ruling applies for the following period
1 July 2010 to 30 June 2011
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
Prior to 20 September 1985 the taxpayer's relative lost their mental capacity and was institutionalised.
Prior to 20 September 1985 The Public Trustee was given control over the taxpayer's relative's affairs, the taxpayer believes the relative did not purchase anymore shares after this time and therefore all shares would be consider pre-20 September 1985.
Post 20 September 1985 the taxpayer's relative died leaving shares to parent 1.
Post 20 September 1985 parent 1 died; leaving shares inherited from the taxpayer's relative and their own shares purchased post-CGT to parent 2.
Post 20 September 1985 parent 2 died; leaving shares inherited from the taxpayer's relative and parent 1 plus their own shares purchased post-CGT and divided them between a number of children including the taxpayer.
The taxpayer sold some of the shares.
The taxpayer is unable to find the exact date parent 1 purchased a parcel of shares but believes their price was $X.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 128-15
Reason for Decision
The cost base of a Capital Gains Tax (CGT) asset is generally the cost or value of the asset when it was acquired.
Some of the shares the taxpayer inherited from parent 2 have passed through a chain of deceased estates. Others came directly from parent 2.
The taxpayer's relative died leaving shares purchased prior to 20 September 1985 (pre-CGT) to parent 1. Under section 128-15 of the Income Tax Assessment Act 1997, for parent 1, the first element of the cost base would have been the market value of the shares on the date of the taxpayer's relative's death.
In parent's 1 hands the shares inherited from the taxpayer's relative became post-CGT assets.
When parent 1 died parent 2 inherited the relative's shares, now a post-CGT asset, and the shares parent 1 acquired post-CGT.
For parent 2, the first element of the cost base will be taken to be parent 1's cost base of the shares.
When parent 2 died the taxpayer inherited the shares; shares initially purchased by the relative, parent 1 and parent 2, for the taxpayer, the first element of the cost base is taken to be parent 2's cost base of the shares.
Example
Relative: acquired 100 pre-CGT shares, market value at date of death $225.00
Cost base
Parent 1: acquired 80 shares of his own, post-CGT $150.00
inherited uncles 100 shares (now post-CGT) $225.00
Parent 2: acquired 60 share of her own, post-CGT $120.00
inherited father's 80 shares $150.00
inherited uncle's 100 $225.00
Child: inherited mother's 60 shares $120.00
inherited father's 80 shares $150.00
inherited uncle's 100 shares $225.00
The taxpayer will be required to recalculate the capital loss and lodge an amended assessment.
The parcel of shares acquired by parent 1 and in which the taxpayer is unable to find the exact purchase date; we will accept a cost of $X.