Private ruling: CGT - Deceased estate
Published: December 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Can the trustee of the estate disregard any capital gain made on the sale of the shares? | A1: No | Q2: Is the trustee of the estate entitled to a deduction for the gifts made to the charities listed in the deceased's will? | A2: No

Relevant facts and circumstances: Under the terms of the deceased's will, the entire assets of the deceased's estate were bequeathed to a number of charities equally. In order to honour the terms of the will, the executors liquidated the estate assets. In doing so the sale of a number of shares that formed part of the estate gave rise to a capital gain. The executors did not retain any funds from the estate to meet any capital gains tax (CGT) liability.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 30-15(1) | Income Tax Assessment Act 1997 Subsection 30-15(2) | Income Tax Assessment Act 1997 Division 128 | Income Tax Assessment Act 1997 Subsection 128-15(2)

Reasons for decision: Detailed Reasoning - Disposal of shares: Under Division 128 of the Income Tax Assessment Act 1997 (ITAA 1997) when a person dies a capital gain or capital loss from a CGT event that results from a CGT asset the person owned just before dying is disregarded. In accordance with subsection 128-15(2) of the ITAA 1997, a legal personal representative (LPR) or a beneficiary is taken to have acquired the asset on the day the deceased died. Any subsequent disposal by the LPR or beneficiary is a CGT event which will result in a capital gain or loss. In this case the shares were not transferred to a beneficiary; they were sold to a third party. Accordingly, the LPR or trustee will make a capital gain. There is no discretion available to the Commissioner to disregard this gain. | Detailed Reasoning - Testamentary gift: Subsection 30-15(1) of the ITAA 1997 provides that entities can deduct a gift in the situations set out in the table in section 30-15. The table sets out who the recipient of the gift can be, the type of gift you can make, how much you can deduct and any special conditions that apply. However, subsection 30-15(2) of the ITAA 1997 specifically excludes testamentary gifts from being deductible under section 30-15(1) of the ITAA 1997. The donations made to the charities in this case were testamentary gifts. Accordingly, the trustee is not entitled to a deduction for these gifts.