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Edited version of your written advice
Authorisation Number: 1012804006346
Ruling
Subject: Cost base of shares
Question 1
Can you use the market value of the shares as at the date of the deceased death as the cost base for those shares?
Answer
No.
Question 2
Can you use the market value of the shares as at the date the deceased inherited them as the cost base for shares?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2015
The scheme commences on
1 July 2014
Relevant facts and circumstances
You are the executor for a deceased estate.
The deceased inherited shares when their spouse passed away.
You have been unable to obtain any acquisition records for these shares through Comsec or the companies themselves.
You are unsure if the shares are pre-capital gains tax (CGT) or post-CGT assets.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-5
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 108-5
Income Tax Assessment Act 1997 Section 110-25
Income Tax Assessment Act 1997 Section 121-20
Income Tax Assessment Act 1997 Section 121-25
Income Tax Assessment Act 1997 Section 121-30
Reasons for decision
A capital gain or capital loss is made when a CGT event occurs. The most common CGT event that happens to real property is its sale or disposal. This is known as CGT event A1. When a CGT event occurs to a CGT asset, the capital gain is created by reducing the capital proceeds by the cost base. An assets cost base comprises of the five elements of costs outlined in Subdivision 110-A of the Income Tax Assessment Act 1997 (ITAA 1997).
Division 121 of the ITAA 1997 contains the record keeping provisions for capital gains and losses. Generally, you must keep records of matters that affect the capital gains or losses that you make. In particular, section 121-10 of the ITAA 1997 states that you must retain the records for five years after the last relevant capital gains tax (CGT) event, i.e. disposal of your shares.
Section 121-20 of the ITAA 1997 provides that you must keep records of every act, transaction, event or circumstance that can reasonably be expected to be relevant to working out whether you have made a capital gain or loss from a CGT event.
Subsection 121-20(5) of the ITAA 1997 states that if the necessary records of an act, transaction, event or circumstances do not already exist, you must reconstruct them or have someone else reconstruct them.
The Commissioner has no official view on alternative cost base figures for a taxpayer that has no records of acquisition of a CGT asset. You are advised to take every step possible to either acquire the original documentation or reconstruct the cost base as accurately as possible.
The Commissioner will accept the market value of the shares on the date the deceased acquired them.