Private ruling: CGT - deceased estate - transfer of shares
Date of advice: 26 August 2022
Published: November 2022
Ruling period: Period ended 30 June 20YY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Will the gift and transfer of the company shares to the Deductible Gift Recipient (DGR)'s under the provisions of the Deceased's Will trigger capital gains tax (CGT) event K3? | A1: Yes. The company shares were owned by the late taxpayer before death. CGT event K3 will be triggered when the shares are transferred to the beneficiaries of the estate. | Q2: Will the capital gains and capital losses from CGT event K3 happening be disregarded under subsection 118-60(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: Yes. The late taxpayer owned the shares before death and a gain or loss would have been deductible to the taxpayer if it had not been a testamentary gift. Therefore, a capital gain or loss made from a testamentary gift of property that would have been deductible if it had not been a testamentary gift is disregarded. | Q3: Will any of subsections 78A(2) to 78A(4) of the Income Tax Assessment Act 1936 (ITAA 1936) apply to deny the application of subsection 118-60(1) ITAA 1997 to the deceased Taxpayer? | A3: No. Subsections 78A(2) to 78A(4) of the ITAA 1936 do not apply to deny the application of subsection 118-60(1) ITAA 1997 to the deceased Taxpayer.

Relevant facts and circumstances: The Taxpayer directed that the balance of their estate after satisfying all testamentary, administrative, and funeral expenses, duties and taxes is to be held on Trust equally for several different DGRs. Some shares were acquired by the deceased Taxpayer prior to 20 September 1985 and all other shares were acquired on or after 20 September 1985 and prior to the Taxpayer's death. The Executors and DGRs have all agreed that an equal portion of each parcel of shares will be transferred to each DGR in-specie and for their own benefit and no shares are to be held on any continuing trust. Most of the share parcels were distributed in-specie to the DGR beneficiaries. The remaining share parcels have been retained to meet any pending income tax liability of the estate, after which, will be transferred to the DGRs in the manner described above.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-215 | Income Tax Assessment Act 1997 section 118-60 | Income Tax Assessment Act 1936 subsection 78A(2) | Income Tax Assessment Act 1936 subsection 78A(3) | Income Tax Assessment Act 1936 subsection 78A(4)