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Ruling

Subject: CGT - deceased estate - cost base of shares

Question 1

Is the first element of the cost base the market value of the shares at the time they were transferred to the deceased estate?

Answer

Yes

Question 2

Can you include eligible incidental costs in the second element of the cost base for the shares?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 2012

Year ending 30 June 2013

The scheme commences on:

01 July 2011

Relevant facts and circumstances

Pursuant to the consent orders the spouse of the deceased was required to transfer shares to them on or before settlement date.

The deceased passed away in 2010.

During the course of 2010 the shares were transferred, from the spouse of the deceased, to the deceased estate.

You want to sell these shares and distribute the funds to the beneficiaries of the deceased estate.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-60,

Income Tax Assessment Act 1997 section 109-5,

Income Tax Assessment Act 1997 section 110-25,

Income Tax Assessment Act 1997 section 110-35, and

Income Tax Assessment Act 1997 section 112-20.

Reasons for decision

Note that all subsequent legislative references are to the Income Tax Assessment Act 1997 unless otherwise stated.

Where an entity transfers a CGT asset to a trust, and you are the trustee, then you are considered to have acquired the asset at the time it was transferred.

The cost base of an asset consists of five elements and generally includes the cost of the asset when a taxpayer bought it as well as the costs associated with acquiring, holding and disposing of the asset.

In your particular situation only the first two elements of the cost base are relevant.

The first element of the cost base is the money or property given for the asset (section 110-25). Although where a taxpayer did not incur any expenditure to acquire the asset, then the market value of the asset (at the time of acquisition) is used.

The second element includes incidental costs. Section 110-35 lists incidental costs that may be incurred to either acquire a CGT asset or that relate to a CGT event. Some of these are:

· Remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant, or legal advisor fees;

· Valuation or apportionment costs;

· Termination or other similar fees incurred as a direct result of your ownership of a CGT asset ending.

In your situation the shares were transferred, from the spouse of the deceased, to the deceased estate.

As such the first element of the cost base for the shares will be the market value of the shares at the time they were transferred to the deceased estate.

In regards to the second element of the cost base for the shares you have not provided details of any incidental costs incurred by the deceased estate. However, if you have incurred any incidental costs, in relation the shares, that satisfy the requirements listed in section 110-35 then you may be able to include them in the second element of the cost base for the shares.