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Edited version of private advice
Authorisation Number: 1052028673672
Date of advice: 21 October 2022
Ruling
Subject: CGT - mere realisation
Question 1
Will the profits from the sale of the Property be assessable income of the deceased estate under section 6-5 of the ITAA 1997?
Answer
No.
Question 2
Will the proceeds from the sale of the Property by the deceased estate be subject to capital gains tax (CGT) under Parts 3-1 and Part 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
The proceeds received from the sale of the Property will not be ordinary income and not assessable under section 6-5 of the ITAA 1997 as the deceased estate is not carrying on a business of property development or undertaking an isolated profit making transaction. After considering all the facts and circumstances, the Commissioner is satisfied that the sale of the Property is a mere realisation of a capital asset and subject to the capital gains tax provisions in Parts 3-1 and 3-3 of the ITAA 1997.
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 was the owner of a property (the Property). After their death, the interest in the Property passed to the deceased estate.
The Commissioner has issued previous rulings confirming that the deceased acquired the Property prior to 20 September 1985 and determined that the deceased was not carrying on a business of property development or had not ventured the Property into an isolated profit-making transaction prior to when they passed away.
Prior to death, the deceased operated a farming business on the Property and lived on the Property.
In the relevant year, the deceased entered into a development agreement with a company set up by the deceased's family to gain development approval over the Property so they could sell. The company submitted development applications.
Between December 20XX and June 20XX, the deceased estate had multiple organisations display interest to purchase the Property.
In the 20XX income year, the deceased estate formally entered into a put and call option deed (the Deed) with the purchaser.
In the 20XX income year, the purchaser exercised its option and the Property settled.
The Property was sold as an entire lot.
No subdivision has been undertaken to sell the Property.
The deceased estate has not claimed any costs as deductions.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 Part 3-1
Income Tax Assessment Act 1997 Part 3-3