Edited version of private advice

Authorisation Number: 1052221607072

Date of advice: 13 February 2024

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time for you to dispose of XXXX's 50% ownership interest in the property and disregard the capital gain or capital loss you made on the disposal?

Answer

Yes.

Having considered your circumstances and the relevant factors the Commissioner will allow an extension of time pursuant to s118-195 of the ITAA 1997. Further information about the Commissioner's discretion can be found by searching ato.gov.au for 'QC 66057'.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On or around 19XX, the Deceased (Brother A) and the brother of the Deceased (Brother B) purchased a property (the Property), as tenants in common.

The Property was 10 acres in size.

On or around 19XX, Brother A and Brother B subdivided the Property.

The Property size reduced to approximately 1.5 acres.

The Property was not used to produce assessable income.

Brother A and his spouse (Spouse A) resided in the Property.

Brother B and his spouse (Spouse B) resided in the Property

Brother B and Spouse B had two children, a son and daughter.

The son (Beneficiary A), and the daughter (Beneficiary B) are the beneficiaries of the Property through testamentary trusts.

On XX XX 20XX, Spouse A passed away.

On XX XX 20XX, Brother B passed away and left a will.

Brother B's will gave their 50% share of the Property, in trust, equally to Beneficiary A (Trust 1) and Beneficiary B (Trust 2).

Clause 3(b)(iii) of Brother B's will states:

• I am confident that [Beneficiary B] and [Beneficiary A] will look after and accommodate my wife [Spouse B] in the way that they always have and ensure she lacks for nothing.

In XX 20XX, a valuation of the Property was completed.

On XX XX 20XX, Brother A (the Deceased) passed away and left a will (the Will).

In XX 20XX, the Executors arranged for an external clean-up of the Property.

The Will of the Deceased gave 50% share of the Property, in trust, equally to Beneficiary A (Trust 3) and Beneficiary B (Trust 4).

Clause 3(b)(iii) of the Deceased's Will states:

• I have made the above request as a result of my wife, [Spouse A], being incapacitated. I am confident that [Beneficiary B] and [Beneficiary A] will look after [Spouse A] in the way that they always have and ensure that she lacks for nothing.

Spouse B is not a beneficiary nor a trustee of the Deceased's estate and so is not acquiring an interest in it, although she is a beneficiary of the 4 trusts.

Beneficiary B initially asked Spouse B to relocate to a granny flat at Beneficiary B's previous residence, Spouse B refused as she was not ready to move from the Property and Beneficiary B's mother-in-law had passed away in the granny flat, which made Spouse B uncomfortable.

From 20XX, Beneficiary A and Beneficiary B have attempted to encourage Spouse B to move out of the Property.

The Executors requested Spouse B move out of the Property multiple times per year.

In early 20XX, Spouse B suffered a fall which resulted in a bone fracture. Spouse B temporarily moved in with Beneficiary B for X-weeks. Once recovered, Spouse B wanted to move back into the Property.

Spouse B wanted to continue living the Property after the Deceased passed away as:

• The Property has always been Spouse B's home
• Spouse B is XX years of age and feels comfortable and safe living in the Property
• Spouse B likes the area in which the Property is located. They have friends nearby.
• Spouse B wanted stability following the passing of Spouse A, Brother B and the Deceased.

On or around XX 20XX, Beneficiary B commenced construction of a new house, including the construction of a granny flat for Spouse B.

At the start of 20XX, Spouse B's health declined, they were not eating or taking medication properly.

In XX 20XX, the Executors arranged for an internal clean-up of the Property. This included selling furniture and condensing all household items.

On or around XX 20XX, construction of the granny flat was completed, and Spouse B advised Beneficiary A and Beneficiary B that she was ready to move out of the Property on condition that she lives in a granny flat on Beneficiary B's property. Spouse B agreed to live in the granny flat for half of the week, and the Property for the other half of the week.

In XX 20XX, the Executors approached real estate agents with the intention of selling the Property.

In XX 20XX, Spouse B's health declined further.

In XX 20XX, Spouse B broke a bone and spent time X in hospital and time X in respite. Spouse B's doctors advised they could no longer live in the Property. Spouse B relocated to the granny flat permanently.

In XX 20XX, the Executors officially engaged a real estate agent to sell the Property.

Beneficiary A and Beneficiary B agreed to allow Spouse B to continue to reside in the Property until its sale and settlement.

In XX 20XX, a contract of sale was signed to sell the Property.

On XX XX 20XX, the Property settled.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 118-195

Income Tax Assessment Act 1997 Section 118-210