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Edited version of your private ruling
Authorisation Number: 1012446463025
Ruling
Subject: Main residence exemption
Question
Can any capital gain or loss from the sale of a residence within two years from the date of death be disregarded if it is rented out for less than six years?
Answer:
Yes
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts
In 19XX, the deceased purchased a main residence.
The deceased lived in the main residence until they moved into a nursing home in 20YY.
The deceased did not purchase another main residence.
In 20YY, the main residence was rented out to a third party.
The deceased passed away in 20ZZ.
The executor is preparing the main residence for sale at auction.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-195(1)
Income Tax Assessment Act 1997 Section 118-145
Reasons for decision
Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) allows a capital gain or loss to be disregarded when a CGT event happens to a dwelling owned by a trustee of a deceased estate, if:
· the deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before their death and was not then being used for the purpose of producing assessable income and;
· your ownership interest ends within two years of the death of the deceased.
Subsection 118-145(1) of the ITAA 1997 provides that if a dwelling that was a person's main residence ceases to be their main residence, they may choose to continue to treat it as their main residence. If the dwelling is used for income producing purposes, there is a six year time limit for which the person can continue to treat the dwelling as their main residence (subsection 118-145(2) of the ITAA 1997).
However, if this choice is made, no other dwelling can be treated as that person's main residence during that period (subsection 118-145(4) of the ITAA 1997).
In your case, the dwelling was acquired after 20 September 1985 and used as the deceased's main residence until they moved out in 20YY. The dwelling was rented out from 20YY. The dwelling continued to be the deceased's main residence until their death. You intend to sell the dwelling in the near future.
As the dwelling was the main residence of the deceased until their death, subsection 118-145(1) of the ITAA 1997 will allow the dwelling to continue to be their main residence. A full exemption will be available as long as the dwelling is sold within two years of the deceased's death and rented out for less than six years.