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Edited version of private advice
Authorisation Number: 1052195641233
Date of advice: 24 November 2023
Ruling
Subject: Deceased estate - deed of family arrangement
Question
Under the terms of the Deed of Family Arrangement (the Deed), did the ownership interests in Property No.1 pass to the beneficiaries of the Deceased Estate for the purposes of section 128-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
Having considered your circumstances and the relevant factors, the Commissioner is satisfied that the Deed was entered into by the beneficiaries of the Deceased Estate to settle a potential claim made within the time limit required in the relevant State of Australia.
Any consideration given by the beneficiaries for the asset consisted only of the variation or waiver of a claim to one or more other capital gains tax (CGT) assets that formed part of the Deceased Estate. Accordingly, it is accepted that the ownership interests acquired by the beneficiaries under the Deed passed to them pursuant to paragraph 128-20(1)(d) of the ITAA 1997.
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 died on DD MM 20XX.
The Deceased was survived by their X children, Person A, Person B, Person C, 'Person D, Person E and Person F (the Beneficiaries).
The Deceased left a Will. Under the terms of the Will:
Person A and Person B were appointed Executors of the Deceased Estate.
The Deceased's ownership interest in Property No.1 was bequeathed to Person A, Person B, Person C in equal shares.
The Deceased's ownership interest in Property 2 was bequeathed to Person D and Person E.
Person F was bequeathed an amount of $ X. Person F's child was bequeathed an amount of $X.
Person F's bequest was substantially less in value than those of the other Beneficiaries. Person F advised that they would initiate legal action unless there was an adjustment to their share of the Deceased Estate.
Probate was granted on or around DD MM 20XX.
Property 2 was sold in MM 20XX, by the trustee of the estate.
On or around DD MM 20XX, in response to the potential claim against the estate the Deed was entered into by the Beneficiaries.
The Deed provided:
the Deceased's interest in Property No.1 was to be transferred to Person A, Person B, Person C, 'Person D, and Person E as tenants in common in equal shares.
the proceeds of the sale of the Property No.2 shall form part of the residuary estate.
each of the children will receive 1/6th of the residuary estate, with an adjustment for the monies paid to Person F and Person F's child, under the original terms of the Will.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 128-20