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Edited version of your written advice
Authorisation Number: 1051177923840
Date of advice: 9 January 2017
Ruling
Subject: Capital gains tax - deceased estate - Commissioner's discretion to extend the two year period
Question
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period until a specific date in 20XX?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 20YY.
The scheme commences on
1 July 20XX.
Relevant facts and circumstances
The deceased passed away in 20ZZ.
The deceased owned a property which was their main residence (the property).
The property was originally purchased after 20 September 1985.
A clause of the deceased's will indicated that the whole of their estate is to be divided between their children in equal shares (spouse predeceased).
During the administration of the estate, the executor sought expert legal counsel in an attempt to resolve the interpretation of an ambiguous clause in the deceased's will.
The issue involved the interpretation of and the appointment of the executor. After some time and many lengthy discussions between the executor, the legal counsel and the beneficiaries, the executor sought to resolve the issue by seeking Court directions. This took approximately 18 months to achieve.
The administration was also delayed by the beneficiaries initially not being co-operative in reaching an agreed selling price for the property.
In 20XX, the property settled.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 subsection 118-130(3)
Income Tax Assessment Act 1997 section 118-195
Income Tax Assessment Act 1997 subsection 118-195(1)
Reasons for decision
Summary
The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until a specific date in 20XX.
Detailed reasoning
The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person's estate sell that dwelling within two years of the date of death.
Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was:
● Acquired by the deceased before 20 September 1985, or
● The deceased's main residence when they died.
The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it.
The delay in disposing of the dwelling was due to the complexity of the deceased estate which delayed the completion of the administration of the estate.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.