ATO ID 2003/1191: Holding period rule and related payments rule: qualified person - deceased estate
Date of decision: 27 November 2003
Year of income: Year ended 30 June 2002
Business line: Private Groups and High Wealth Individuals

Issue
Is a beneficiary of a deceased estate a qualified person under section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to a dividend paid to the beneficiary by the executor during the period of administration of the deceased estate.

Decision
Yes. As the beneficiary of the deceased estate held the interest in the shares at risk and the executor was a qualified person, the beneficiary will also be taken to be a qualified person.

Facts
On 22 May 2002, the executor of a deceased estate established that sufficient monies existed in the estate to meet expenses and distributed a dividend received by the estate to a beneficiary before the estate was fully administered. The shares were acquired by the deceased on 15 April 2000. The executor was a qualified person in relation to the dividend.

Reasons for decision
Summary: Since the shares were acquired by the deceased after 31 December 1997, section 160APHL of the ITAA 1936 will apply. By virtue of section 160APHH(4) of the ITAA 1936, the executor will also be taken to have acquired the shares on 15 April 2000, the day on which the deceased acquired the shares. The beneficiary's interest in the relevant shares held by the executor of the deceased estate will be determined under sub-section 160APHL(5) of the ITAA 1936. Sub-section 160APHL(7) provides for the taxpayer's interest determined under section 160APHL(5) to have a long position with a delta of plus one in relation to itself. As the trust is a deceased estate, under paragraph (b) of sub-section 160APHL(10) of the ITAA 1936 the beneficiary of the trust will not be taken to have acquired either a short position equal to the beneficiary's long position under sub-section 160APHL(7) or a long position equal to so much of the taxpayer's interest in the trust holding as is a fixed interest. Consequently, in the absence of any other long or short positions, the beneficiary will be taken to have held the relevant interest in the shares at risk and would be a qualified person in relation to the distribution made by the executor.

Legislative references: Income Tax Assessment Act 1936 section 160APHH section 160APHL section 160APHO
Subject references: Franked dividends Deceased estates Trust beneficiaries Dividend income Shares Imputation credits