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Edited version of private advice
Authorisation Number: 1051576736790
Date of advice: 11 September 2019
Ruling
Subject: Capital gains tax
Question 1
As of 30 June 20XX have the estates assets passed to the beneficiaries under the deceased's will for the purposes of sections 104-215 and 128-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No. It is considered that the estates assets have not passed to the beneficiaries at 30 June 20XX as the estate is not fully administered and the beneficiaries do not have absolute entitlement to the assets of the estate. Further information can be found by searching deceased estates QC 23846 on ato.gov.au.
Question 2
Will the CGT assets pass to the beneficiaries to section 128-20 of the ITAA 1997 where the court makes an order to vary the will to enable the Executors to distribute the estates assets to the beneficiaries in equal portions?
Answer
Yes. Where the court varies the will to distribute the assets in equal portions, it is considered that at this point the beneficiaries will be absolutely entitled and the assets will pass to the beneficiaries under section 128-20 of the ITAA 1997. Further information can be found by searching when a beneficiary is presently entitled QC 40484 on ato.gov.au.
Question 3
Will any capital gain or loss which arises under section 104-215 of the ITAA 1997 on the distribution to the beneficiaries be disregarded under subsection 118-60(1) of the ITAA 1997?
Answer
Yes. In this case, CGT event K3 will occur when the assets of the estate passes to the beneficiaries as they are an exempt entities. However as the beneficiaries are endorsed as DGR's any capital gain or loss made from the assets passing from the estate to the beneficiaries will be disregarded. Further information on CGT event K3 can be found by searching QC 22154 on ato.gov.au.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The deceased died in 20XX
Probate was granted in 20XX.
The deceased had a will and appointed executors for the deceased's estate.
The deceased left specific instructions in the terms of the will.
The estate is made up of different type of CGT assets.
The estate has not been fully administered at year ended 30 June 20XX.
The executors are approaching retirement and do not wish to remain as trustees for an extended period of time.
Beneficiary A is a deductible gift recipient.
The executors have expressed a wish to distribute the estate absolutely to the beneficiaries.
Assumptions
The executors will make an application to court to vary the terms of the will.
Beneficiary B will be endorsed as a deductible gift recipient.
The court will vary the will to allow the executors to distribute all the estates assets in equal portions to the deductible gift recipients.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-215
Income Tax Assessment Act 1997 section 118-60
Income Tax Assessment Act 1997 section 128-20