Private ruling: CGT - deceased estate - extension of time
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period in accordance with your request? | A1: No. | Q2: Can you disregard any capital gain or loss that arises from the disposal of the property under section 118-195 of the ITAA 1997? | A2: No.

Relevant facts and circumstances: The deceased moved from their main residence to an aged care facility. The property was purchased after 20 September 1985. The property was rented, from 20XX. The deceased passed away after the time it was rented. Probate for the will was granted and A was appointed as Executor of the will. The property was listed for sale after probate was granted. The tenant remained in residence until the property was sold. The first contract of sale was entered into within the two year period. The contract fell through as the buyer was unable to meet the special conditions of the contract. The property was put back on the market. The asking price was reduced on many occasions due to the low market interest, which was influenced by the ongoing negative impact of cyclones in the region. A second contract of sale was entered into outside the two year period. This contract fell through as the buyer was diagnosed with a terminal illness and returned to their home overseas. The third and final contract was entered into late 2013 and settlement occurred in early 2014.

Relevant legislative provisions: Income Tax Assessment Act 1997 (ITAA 1997) section 118-195

Reasons for decision: Summary: As per subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or capital loss you make from a capital gains tax (CGT) event that happens in relation to a dwelling or your ownership interest in it is disregarded if: (a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied. | Detailed Reasoning - And also one of these items: 1 the deceased *acquired the *ownership interest on or after 20 September 1985 and the *dwelling was the deceased's main residence just before the deceased's death and was not then being used for the *purpose of producing assessable income your *ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner .. 2 the deceased *acquired the *ownership interest before 20 September 1985 the *dwelling was, from the deceased's death until your *ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the *CGT event was brought about by the individual to whom the *ownership interest *passed as a beneficiary - that individual In this case, when the deceased died the property passed to the legal personal representative. The property was not their main residence just before their death. The property was used to produce assessable income before the deceased passed away, having been available for rent since 20XX. Accordingly, you do not satisfy either of the items in column two of the table.