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Edited version of private advice
Authorisation Number: 1052240379608
Date of advice: 10 April 2024
Ruling
Subject: CGT - cost base
Question
Is the cost base of your interests in the land the market value on the date title passed to you?
Answer
Yes
This ruling applies for the following period:
Year ended 30 June 20YY
The scheme commenced on:
1 July 20YY
Relevant facts and circumstances
You acquired a X% interest in land in 20XX.
The interest in the land was gifted from a related individual and your name was added to the certificate of title in 20XX.
In 20XX, you sold your interests in the land to an unrelated party. The sale price was $X million and settlement has now occurred.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 110-25(1)
Income Tax Assessment Act 1997 subsection 112-20(1)
Reasons for decision
Subsection 110-25(1) of the ITAA 1997 provides that the cost base of a CGT asset consists of 5 elements:
• the money you paid to acquire the asset
• incidental costs
• costs of owning the CGT asset
• capital costs to increase or preserve the value of your asset
• capital costs of preserving or defending your title or rights to your CGT asset
Under subsection 112-20(1) of the ITAA 1997 the first element of your cost base of a CGT asset you acquire from another entity is its market value if:
(a) you did not incur expenditure to acquire it
(b) some or all of the expenditure you incurred to acquire it cannot be valued, or
(c) you did not deal at arm's length with the other entity in connection with the acquisition.
Application to your circumstances
You both acquired your X% interests in the freehold land as a gift from a related individual.
As your interests in the land were not acquired at arm's length and the land was gifted to you, the cost base will be the market value at the time it was acquired in 20XX in accordance with subsection 112-20(1).