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Edited version of your private ruling
Authorisation Number: 1012493182179
Ruling
Subject: Capital gains tax
Question and answer:
Will the Commissioner exercise his discretion to allow an extension of the two year time period to disregard any capital gain or loss made on the sale of the dwelling of the deceased?
Yes.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
You are the executor and beneficiary of the will of a relative.
Part of the estate comprised of a dwelling which was the main residence of the deceased.
It was intended that the dwelling be immediately sold.
Listing of the dwelling for sale was delayed due to a dispute with another relative.
A contract for sale of the dwelling was achieved within two years of the date of death of the deceased.
Settlement was delayed because the title deed to the dwelling could not be located and had to be reissued.
Settlement for the sale of the dwelling occurred just over two years after the date of death of the deceased.
The dwelling was never used for income producing purposes.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195
Reasons for decision
Where you inherit the dwelling of a deceased person you may be exempt from any capital gain you make when you sell the property.
Section 118-195 of the Income Tax Assessment Act 1997 provides that where the dwelling is sold within two years of the deceased's death, the trustee or beneficiary can disregard the capital gain or capital loss resulting from the sale.
Where the sale of the property is delayed, the trustee or beneficiary of the deceased estate may apply to the Commissioner to grant an extension of the two year time period under the Act.
Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the trustee or beneficiary, 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 unforseen 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 or a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control.
In your situation, you were unable to dispose of the deceased's dwelling within two years of the deceased's death due to a dispute with another relative and the title deed to the property having to be reissued. These factors were outside your control.
Therefore, the Commissioner will exercise his discretion to extend the two year period in which a deceased's main residence must be disposed of. You are entitled to disregard the capital gain or capital loss which resulted from the sale of the dwelling.