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Edited version of private advice
Authorisation Number: 1052170827464
Date of advice: 28 September 2023
Ruling
Subject: Deceased estate - multiple properties
Question 1
Is the Deceased Estate entitled to disregard the capital gain or loss on the disposal of its ownership interest in the Original Property pursuant to section 118-195(2)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?"
Answer
Yes. From the date that the Deceased died until the date that the Original Property was disposed, the property was the main residence of an individual who had a right to occupy the property under the deceased's will (the Life Tenant).
Question 2
Can the Estate disregard any capital gain arising from the disposal of its ownership interest in the Replacement Property in accordance with section 118-210(3) of the ITAA 1997?
Answer
Yes. Having considered your circumstances and the relevant factors, the Commissioner agrees the Replacement Property was acquired under the Will of the Deceased and in accordance with our view in Taxation Determination TD 1999/74 Income tax: capital gains: in what circumstances does a trustee of a deceased estate acquire an ownership interest in a dwelling 'under the deceased's will' for the purposes of subsection 118-210(1) of the Income Tax Assessment Act 1997?
This ruling applies for the following periods:
1 July 20YY to 30 June 20YY
The scheme commenced on:
1 July 20YY
Relevant facts and circumstances
On DD MM 20YY, the Deceased passed away.
As at the date of death, the Deceased and the Life Tenant lived at the Original Property as their main residence and co-owned the property as tenants in common in equal shares. It was acquired in 20YY and was less than 2 hectares in size.
The Deceased left a Will which granted the Life Tenant a right to occupy the Original Property for as long as they wishes. The Life Tenant was also granted a right to request the Original Property be disposed and a Replacement Property acquired, provided the proceeds from the disposal of the Estate's ownership interest in the Original Property were the same or less than the purchase price of the Estate's ownership interest in the Replacement Property.
The Life Tenant treated the Original Property as their main residence from the date of death until 20YY, when the Original Property was disposed and the Replacement Property was acquired pursuant to a request from the Life Tenant and in accordance with the Will. The Estate's ownership interest in the Replacement Property was less than the amount received for the disposal of its ownership interest in the Original Property.
In MM 20YY, the Replacement Property was disposed. The Replacement Property had been the main residence of the Life Tenant for the Estate's entire ownership period.
Neither the Original Property nor the Replacement Property were used to produce income during the Deceased Estate's ownership period.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195
Income Tax Assessment Act 1997 section 118-210