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Edited version of your private ruling
Authorisation Number: 1012528271214
Ruling
Subject: Capital gains tax
Question and answer
Will the Commissioner exercise his discretion to allow a longer period for you to disregard any capital gain or capital loss you make from the disposal of the inherited property under section 118-195 of the Income Tax Assessment Act 1997?
Yes
This ruling applies for the following periods:
Year ended 30 June 2013
The scheme commenced on:
1 July 2012
Relevant facts and circumstances
The deceased died on dd/mm/yyyy.
The primary benefit of the will consisted of a house (the property).
The property was purchased prior to 20 September 1985.
The property was the deceased's main residence.
In the relevant year, Beneficiary X commenced proceedings seeking a greater provision of the estate, other than equal share provided for under the will. Beneficiary Y defended this action.
In the relevant year, the proceedings were settled.
In the relevant year, the parties applied for probate.
Probate was granted in the relevant year.
The parties disagreed with appointing a real estate agent for the sale and determining the market value of the property.
The parties searched the property, financial institutions and previous solicitors for a copy of the original certificate of title to the property.
In the subsequent year, the parties applied for a lost certificate of title and transmission application. A replacement certificate of title was granted in the relevant year.
In the subsequent year the parties engaged a valuation company and obtained a valuation of the property.
In the subsequent year the property was sold at auction. Settlement occurred on in the subsequent year.
The matter has primarily and substantially delayed by beneficiary X's illness.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 128-15.
Income Tax Assessment Act 1997 Section 118-195.
Income Tax Assessment Act 1997 Section 118-200.
Income Tax Assessment Act 1997 Section 118-210.
Reasons for decision
Under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997). Where the deceased acquired the ownership interest before 20 September 1985, there is a full CGT exemption for the beneficiaries to whom such a dwelling passes for any capital gain that is made from a relevant CGT event happening if:
(1) the beneficiaries' ownership interest ends within two years of the deceased's death, or
(2) from the time of the deceased's death until the beneficiaries' ownership interest ends, the dwelling was the main residence of one or more of the following:
· the spouse of the deceased immediately before death (except a spouse living permanently and separately apart from the deceased)
· an individual who had a right to occupy the dwelling under the deceased's will, or
· if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual.
A trustee or beneficiary of a deceased estate may apply to the Commissioner to grant an extension of the two-year 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 2 year period (for example, the taxpayer or a family member has a severe illness or injury)
· settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control.
Taking into consideration your particular circumstances, the Commissioner has decided to exercise his discretion to allow you to disregard any capital gain or capital loss you made from the disposal of the property.