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Edited version of your written advice
Authorisation Number: 1051195461712
Date of Advice: 24 February 2017
Ruling
Subject
Capital gains tax - deceased estate - Commissioner's discretion to extend the two year period - main residence exemption
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 xx xxxxx 20xx
Answer
Yes.
This ruling applies for the following period(s)
Year ended 30 June 20xx.
The scheme commences on
1 July 20xx.
Relevant facts and circumstances
The client resided at their residence since purchasing the property in 19xx.
The client resided at this address until their death in 20xx.
Probate of the last Will and Testament of the client was granted to the Executor in 20xx .
Clearing out of the property and the administration of the Estate was substantially delayed due to:
One of the beneficiaries of the Estate having a terminal illness
Various conflicts arising between the beneficiaries in relation to the administration of the Estate and the disposal of the property.
The property has been vacant since the client passed away
The property was not used in anyway to produce assessable income since the client passed away.
The property was sold and settlement occurred in 20xx.
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
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 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.
In your case, the delay in disposing of the dwelling was due to the terminal illness suffered by one of the beneficiaries and the conflicts arising between the beneficiaries regarding the administration of the Estate and the disposal of the property. This delay 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.