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Edited version of your written advice
Authorisation Number: 1051192184821
Date of advice: 16 February 2017
Ruling
Subject: Capital gains tax - deceased estate -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?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2017.
The scheme commences on
1 July 2016.
Relevant facts and circumstances
The deceased purchased a main residence (the dwelling) prior to 1985 and resided there up until their death in 201X.
No substantial capital improvements were made to the dwelling.
The dwelling has not been used to produce assessable income.
The deceased's child A resided in the dwelling prior to the deceased's death and continued to reside there until the property was sold.
The deceased's child B is the executor of the deceased's estate.
Child A has a life threatening condition that has required extensive treatment and surgery since the date of the deceased's death and they have not been well enough to source alternative accommodation.
On two occasions contracts for sale of the dwelling failed to proceed as the purchasers were unable to obtain finance.
The dwelling was sold two years, three months after the deceased's death.
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 ddmmyy.
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 caused by unexpected delays in the settlement of the dwelling for reasons outside the beneficiary or trustee's control and these delays prevented you from disposing of the dwelling within the two year time limit.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.