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Edited version of private advice
Authorisation Number: 1052220980650
Date of advice: 13 February 2024
Ruling
Subject: Cost base - deceased estate
Question
Is the cost base of the property that passes to the executors of individual A the market value on the date individual A's spouse, individual B died?
Answer
Yes.
This ruling applies for the following period:
30 June 2024
The scheme commenced on:
1 July 2023
Relevant facts and circumstances
A Crown lease was granted in the 19XX income year in the name of individual B.
The Crown lease was granted for 25 years with the right to transition to a Crown grant.
The Crown lease became a Crown grant under the terms of the Crown lease and the property remained in the name of individual B.
The property converted to Crown grant for a nominal fee. The fee was paid in the 19XX income year.
The Crown grant was registered in the 19XX income year.
Individual B and individual A purchased the adjacent property.
Individual B died in the 20XX income year.
Individual A died in the 20XX income year.
Both properties were sold for $X as part of the Offer and Acceptance.
The properties were sold by the deceased's adult children in their capacities as executors of the Will.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 128-15(2)
Income Tax Assessment Act 1997 Subsection 128-15(4)
Income Tax Assessment Act 1936 Subsection 160ZWA(5)
Reasons for decision
Subsection 160ZWA(5) of the Income Tax Assessment Act 1936 provides if a freehold interest relates wholly to land to which a pre-20 September 1985 original Crown lease related, you shall be taken to have acquired the freehold interest before 20 September 1985.
Subsection 128-15(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the legal personal representative is taken to have acquired the asset on the day you died.
Item 4 of the table in subsection 128-15(4) of the ITAA 1997 provides for an asset acquired before 20 September 1985, the first element of the asset's cost base is the market value of the asset on the day you died.
Application to the circumstances
The Crown lease was converted to Crown grant. The nominal fee was paid in the 1985 income year and the Crown grant was registered in the 1987 income year. For the purposes of subsection 160ZWA(5) the freehold interest was acquired before 20 September 1985.
Individual A acquired the property from the spouse in the 20XX income year when the spouse died. Individual A died in the 20XX income year. The property then passed to their adult children under the Will.
The cost base is determined at the date individual B died and the first element of the cost base is the market value of the property at that time.