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Edited version of private advice
Authorisation Number: 1052161323468
Date of advice: 28 August 2023
Ruling
Subject: CGT - deceased estate and main residence exemption
Question 1
Pursuant to section 118-140 of the Income Tax Assessment Act 1997 (ITAA 1997), are the two properties both treated as the deceased's main residence just before their death, for the purposes of satisfying section 118-195 of the ITAA 1997?
Answer
Yes.
Section 118-140 of the ITAA 1997 allows you to extend the main residence exemption for a period up to 6 months, when you acquire an ownership interest in a dwelling that is to become your main residence and you still have an ownership interest in your existing main residence.
The period during which the deceased owned both properties before their death was less than 6 months. The deceased lived in Property B for at least 3 months in the 12 months ending when their ownership interest ended and did not use it to produce income. Having considered your circumstances and relevant factors, the Commissioner is satisfied that section 118-140 of the ITAA 1997 allows both properties to be treated as the deceased's main residence just before their date of death, for the purposes of satisfying section 118-195 of the ITAA 1997.
Question 2
Can the capital gain or loss on the sale of both properties be disregarded under section 118-195 of the ITAA 1997?
Answer
Yes.
As section 118-140 of the ITAA 1997 allows both properties to be treated as the deceased's main residence just before their date of death and both properties were sold with 2 years of their date of death, any capital gains or losses can be disregarded under section 118-195 of the ITAA 1997 on the disposal of both properties.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The deceased passed away on XX XX 20XX and left a Will.
The estate of the deceased included two properties.
The first property (Property A) was acquired by the deceased less than 6 months before they passed away.
The deceased lived in property A until they passed away.
Property A is less than 2 hectares in size and was not used for the purpose of producing assessable income.
The second property (Property B) was acquired by the deceased in 20XX.
Property B was the deceased's main residence from 20XX until they moved to Property A in XX 20XX.
Property B is less than 2 hectares in size and was not used for the purpose of producing assessable income.
The deceased had not yet disposed of Property B before they passed away.
Property B remained vacant until it was sold by the estate.
Both properties were sold by the estate within 2 years of the deceased's date of death.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-140
Income Tax Assessment Act 1997 section 118-195