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Ruling
Subject: Capital gains tax - deceased estate - transfer of shares
Question
Is the capital gain or capital loss made on the transfer of the assets to a deductible gift recipient (DGR) disregarded?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commences on:
1 July 2011
Relevant facts and circumstances
The deceased passed away in the year ended 30 June 2011.
The Will provides that the remaining of the estate after specified gifts are distributed to beneficiaries is to go to the foundation for the benefit of the foundation. The specified distributions specified in the Will have been already been distributed.
Remaining in the Estate are several parcels of shares which the Executor wishes to transfer to the foundation in accordance with the Will. Some of these shares have increased in value from the deceased's date of death.
The foundation is registered as a DGR and the trustee of the foundation is a company.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-215
Income Tax Assessment Act 1997 section 118-60
Income Tax Assessment Act 1997 section 128-20
Income Tax Assessment Act 1997 section 128-15
Reasons for decision
A capital gains tax (CGT) event K3 happens if a CGT asset owned by the deceased person just before they died passes to a beneficiary that is an exempt entity when the asset passes. The time of the event is just before the deceased died, which means that any resulting capital gain or capital loss is accounted for in the final income tax return lodged on behalf of the deceased.
A capital gain or loss made from a testamentary gift of property is disregarded if the gift would have been deductible had it not been a testamentary gift.
In your situation, CGT event K3 will apply to the late taxpayer, in their own right, rather than their estate. As The Foundation is a deductible gift recipient and the deceased would have been entitled to a gift deduction, any capital gain or capital loss that the deceased makes will be disregarded.