Edited version of private advice

Authorisation Number: 1052005671889

Date of advice: 15 July 2022

Ruling

Subject: CGT - deceased estate

Question 1

Will the Commissioner exercise their discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the X year period to dispose of the dwelling?

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 66057' on ato.gov.au.

Note: The extension of time only applies to the share of the property that passed to you under the deceased's will.

Question 2

Will any capital gain or loss from the sale of the XX% interest you acquired in the property in XXXX be disregarded?

Answer

Yes. Under section 104-10 of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset. However, subsection 104-10(5) of the ITAA 1997 provides that you disregard any capital gain or loss if you acquired the asset before XX XXXXXXXXX XXXX.

Question 3

Will any capital gain or loss from the sale of the XX% interest that passed to you under your parent's will be disregarded?

Answer

Yes. Under section 104-10 of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset. However, section 118-195 of the ITAA 1997 provides that you disregard any capital gain or loss that happens in relation to your ownership interest in a dwelling that passed to you as a beneficiary of a deceased estate, where:

• the deceased purchased the dwelling before XX XXXXXXXXX XXXX, and
• your ownership interest ends within X years of the deceased's death or within a longer period allowed by the Commissioner.

In your case the Commissioner has exercised their discretion to allow you the longer period to dispose of the dwelling, so any capital gain or loss from the sale of this interest will be disregarded.

Question 4

Will any capital gain or loss from the sale of the XX% interest that you purchased from the deceased estate be disregarded?

Answer

No. Under section 104-10 of the ITAA 1997 CGT event A1 happens if you dispose of a CGT asset. There are no exemptions that apply to this interest, so any capital gain or loss will not be disregarded.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You purchased a residential property jointly with the deceased under a 'tenants in common' title before XXXX.

The property is smaller than XX hectares.

The deceased lived in the property as their main residence from the time of purchase until the 20XX income year.

You never resided in the property.

The deceased went into full time care during the 20XX income year and the property remained vacant until it was sold.

The deceased passed away in the 20XX income year.

Under the terms of the deceased's will, their interest in the property was left equally to you and your sibling.

The deceased's will did not state what the deceased's ownership interest in the property was.

When you purchased the property with the deceased you did not each pay XX% - you contributed substantially more than the deceased by way of monetary payments.

Neither the executor nor your sibling acknowledged this and as such you made a legal claim against the Estate to determine the proportion of the property that you owned in your own right.

Legal proceedings commenced in approximately a month after the deceased's passing.

In the course of these legal proceedings, the executor conceded that the ownership of the property was in fact in the proportion of XX% to you and XX% for the estate.

Consequently, XX% passed to yourself and XX% to your sibling under the terms of the deceased's will.

You deemed the sale of the property unworkable while the estate remained involved.

You purchased the remaining XX% interest in the property, which was the share your sibling would have inherited, for an agreed sum.

A deed was subsequently drawn up by your solicitor with settlement in the 20XX income year. Legal proceedings were finalised at the same time.

The executor and your sibling denied you access to the property until the time your legal ownership was recognised.

The property had been unoccupied since the deceased went into full time care with no maintenance undertaken.

The property was broken into several times resulting in substantial damage and theft.

Given, this the property needed to be cleared out and cleaned to be ready for sale. This took several weeks to complete given the state of the property and considering you work full-time.

The property was first listed for sale by auction in the 20XX income year.

The property was sold with settlement approximately XX weeks after being listed for sale, still in the 20XX income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 118-195