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Ruling
Subject: Capital gains tax - deceased estate
Question and answer
Can you disregard any capital gain or capital loss made on the sale of the dwelling?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2012
The scheme commenced on:
1 July 2011
Relevant facts and circumstances
The property was the main residence of the deceased and was never used to produce income.
The settlement date was only 3 weeks outside the normal 2 year period allowed.
You had your house on the market hoping to sell it so you could move into the house and the sale of your house was not successful so you put the house on the open market to sell it.
When the property was put on the open market two sales fell through due to the people wanting to buy the property not being able to sell their homes or get finance.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 118-195(1).
Reasons for decision
Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property acquired by the deceased after 20 September 1985 if:
· the property was the deceased's main residence just prior to their death
· it was not being used to produce assessable income at this time, and
· your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed).
The house was used as the deceased main residence and was never used to produce income.
Due to you not being able to sell your own property so you could move into the house and two other contracts falling through due to lack of finance and sale of dwellings you have gone 3 weeks over the 2 year limit.
The Commissioner will exercise his discretion to extend the 2 year time limit due to circumstances out of your control such as contracts falling through and you not being able to sell your own property.
Any capital gain or loss made on the sale of the property can be disregarded.