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Edited version of private advice
Authorisation Number: 1051594633316
Date of advice: 16 October 2019
Ruling
Subject: Capital gains tax - deceased estate - two year discretion
Question
Will the Commissioner exercise the 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 settlement?
Answer
Yes. Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time. Further information about this discretion can be found by searching 'QC 52250' on ato.gov.au
This ruling applies for the following period
Year ended 30 June 20XX
The scheme commences on
1 July 20XX
Relevant facts and circumstances
The deceased died more than two years ago.
The deceased acquired a dwelling (the dwelling) after 20 September 1985. The dwelling was not used to produce assessable income.
The dwelling was the deceased's main residence until the time of their death.
The deceased's will bequeath the following:
1. The widow was allowed to reside in the dwelling for a set period after the deceased's death, or such other period as per the Executor's discretion, and thereafter the property is to be sold and form part of the residuary estate.
2. The rest and residue of the deceased's Estate will be distributed to the deceased's Trustees upon Trust.
Probate of the deceased's will was granted.
Subject to the executor's discretion the widow was granted the right to remain in the private residence. The widow occupied the property as her principal place of residence from the date of purchase (by the deceased) until the date of sale of the property.
The administration of the deceased estate was delayed due to the will being challenged, and a family provision claim being lodged by the beneficiaries.
Negotiations took place between the beneficiaries. A settlement was reached with court orders being handed down months later.
As a result of the settlement and court order the dwelling was listed for sale. An offer was accepted by the beneficiaries and an exchange of contracts was arranged to take place. The executor signed the proposed contract, but the prospective purchaser withdrew from the proposed exchange.
The real estate agent was subsequently unable to introduce any prospective buyers at a price reasonably acceptable to the beneficiaries. The market was extremely weak and the property was not proactively marketed.
The executor changed real estate agents which culminated in a purchaser entering a new contract and subsequently settlement thereafter. The property was sold for a specified amount with the sale proceeds divided in accordance with the deceased's will and subsequent court order making provision for the widow to receive a lump sum for a specified amount to be borne by the remainder of the beneficiaries of the estate.
The dwelling is on land that is less than XX hectare.
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)