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Edited version of your private ruling
Authorisation Number: 1012474662350
Ruling
Subject: Main residence exemption
Question
Can the Commissioner exercise the discretion to extend the two year rule in regards to the disposal of a deceased's main residence?
Answer:
No
This ruling applies for the following period
Year ending 30 June 2013
The scheme commenced on
1 July 2007
Relevant facts
The deceased passed away in 20XX.
The property was the principal place of residence for the deceased from 19YY until their death.
The property has never been rented, nor has any income been derived from the property.
The property was vacant from 20XX until settlement other than family members intermittently occupying the property overnight to meet insurance requirements.
The deceased had a number of children who are all living and are equal beneficiaries to the deceased's estate.
The property is part of a development of Z units.
You submit that the sale of the property was delayed due to
· the failure of a retaining wall on a steep slope
· stabilisation of the steep slope
· removal of dangerous trees.
You received consistent advice that it would not be possible to sell your property until these issues had been addressed. These issues were resolved in the relevant year, and in offering the property for sale in the subsequent year you undertook to reserve funds in a trust fund to address the longer-term issue.
The unit holders in the complex have contributed over $V towards remedying the slope stability problem associated with the property.
Settlement on the sale of the property was completed in the subsequent year.
Between 20XX and the subsequent year the executor/trustee has spent over 200 hours involved in site visits, meetings, consideration of specifications and assessment of reports relating to the significant issues.
The estate included significant shareholdings.
The deceased had produced items with high sentimental value to the family. The beneficiaries expressed a strong desire for the items to be catalogued to facilitate complete distribution within the family.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195
Reasons for decision
Section 118-195 of the ITAA 1997 allows an individual to disregard a capital gain or capital loss made from a Capital Gains Tax event (ie. sale of the property) that happens in relation to a dwelling where:
The ownership of the dwelling passed to you as the beneficiary of a deceased person's estate,
The deceased person died after 20 August 1996,
The deceased acquired the dwelling before 20 September 1985, and
The dwelling was the deceased person's main residence just before death.
You fit into the above requirements. Therefore, you may be eligible to disregard the capital gains tax if:
· you dispose of your interest in the dwelling within two years of the deceased's death, or
· the dwelling is your main residence from the date of death until the time your ownership ends.
A trustee or beneficiary of a deceased estate may apply to the Commissioner to grant an extension of the two year time period, where the CGT event happens in the 2008-09 income year or later income years. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the beneficiary or trustee, for example:
· the ownership of a dwelling or a will is challenged;
· the complexity of a deceased estate delays the completion of administration of the estate;
· a trustee or beneficiary is unable to attend to the deceased estate due to unforeseen or serious personal circumstances arising during the two-year period (for example, the taxpayer or a family member has a severe illness or injury); or
· settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control.
These examples are not exhaustive.
In exercising the discretion the Commissioner will also take into account whether and to what extent the dwelling is used to produce assessable income and for how long the trustee or beneficiary held the ownership interest in the dwelling.
The Commissioner will not exercise his discretion in your case.