| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012700607498
Ruling
Subject: CGT asset cost base
Question 1
Is the cost base of the shares acquired by X during his/her life time the same cost base applicable to the Estate of Y?
Answer
Yes.
Question 2
Does the Estate of DVA need to hold the in specie distribution of shares for 12 months in order to be eligible for the 50% CGT discount?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
Parent (A) passed away late August 20XX.
Parent (B, the deceased), passed away early March 20XX.
You were appointed the administrator of A's estate.
You were appointed executor of B's estate.
A purchased shares in a company during his/her life and were held for more than 12 months.
At the time of his/her death, A still owned the shares.
Under the will of A, the sole beneficiary of his/her estate was B.
The will of A provided that distributions to B could be made in specie.
Early August 20XX the Estate of A made an in specie distribution of the shares to the Estate of B.
The shares remain unsold in the Estate of B.
The current value of the shares is greater than the original purchase price paid by A.
The Estate of B wishes to sell the shares and make distributions to the beneficiaries.
The beneficiaries of the Estate of B are all Australian residents and are not under any legal disability.
Relevant legislative provisions
Income Tax Assessment Act 1997 (ITAA 1997) section 110-25
Income Tax Assessment Act 1997 (ITAA 1997) section 115-30
Reasons for decision
Question 1
Detailed reasoning
The cost base of an asset consists of five elements and generally includes the cost of the asset when a taxpayer bought it as well as the costs associated with acquiring, holding and disposing of the asset.
The cost base of a capital gains tax (CGT) asset is generally the cost of the asset when you bought it. However, it also includes certain other costs associated with acquiring, holding and disposing of the asset.
Where an asset, which was acquired by the deceased person on or after 20 September 1985, is acquired from a deceased estate, the first element of the asset's cost base is taken to be the deceased person's cost base of the asset on the day they died.
Where the deceased person dies on or after 21 September 1999, if the indexation method was applied to the cost base of the deceased's asset, you must recalculate the first element of your cost base to leave out any indexation that may have been included.
In your case, the cost base of the shares held by the Estate of B, that were acquired from the Estate of A, will be the cost base of the asset when A passed away, less any indexation if applicable.
Question 2
Detailed reasoning
In administering and winding up a deceased estate, a legal personal representative may need to dispose of some or all of the assets of the estate. Assets disposed of in this way are subject to the normal rules and any capital gain the legal personal representative makes on the disposal is subject to CGT. If a beneficiary sells an asset they have inherited, the normal CGT rules also apply.
Section 115-30 of the ITAA 1997 provides that for the purpose of the CGT general discount ownership test an executor or beneficiary of a deceased estate will acquire the asset on the same day that the deceased acquired it, if the asset was acquired by the deceased after 20 September 1985 (post CGT).
In this case, B was the sole beneficiary of the Estate of A. The Estate of B acquired an in specie distribution of the post-CGT shares from the Estate of A early in August 2014.
As A pre-deceased B, B acquired the post-CGT shares on the date that A acquired them, for the purpose of the general discount. Accordingly, the Estate of B is considered to have held the shares for over 12 months and will be entitled to the CGT general discount.