Private ruling: Capital gains tax - deceased estate
Published: April 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

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? | A1: Yes

Relevant facts and circumstances: The deceased's main residence (the property) formed part of their estate. The property was not used by the deceased to produce assessable income. You were the sole beneficiary to the deceased's estate. Probate was granted. Members of your family lodged a Family Provision claim on the estate which was settled at mediation and under court orders. You questioned the fees of the estate's solicitor and this resulted in a long and drawn out dispute between you and the executor of the estate. This dispute was settled under a deed of release. The property was finally transferred into your name. You placed the property on the market at the first available opportunity. You were not legally entitled to dispose of the property until it had been transferred into your name. The property was sold with settlement occurring during the 2014-15 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1)

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee of a deceased estate to disregard a capital gain or loss from a dwelling if: • the property was acquired by the deceased before 20 September 1985, or • the property was acquired by the deceased 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, and • your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: • the ownership of a dwelling or a will is challenged, • the complexity of a deceased estate delays the completion of administration of the estate, • a trustee or beneficiary is unable to attend to the deceased estate due to unforeseen or serious personal circumstances arising during the two year period (eg the taxpayer or a family member has a severe illness or injury), or • settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for reasons outside the beneficiary or trustee's control. In this case, the terms of the will were challenged. Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.