Private ruling: Capital gains tax - shares - cost base
Date of advice: 1 June 2017
Published: September 2017
Ruling period: Income year ending 30 June 2017 | Income year ending 30 June 2018
Date scheme commenced: 1 July 2016.

Ruling: Q1: Will the first element of the cost base of the share originally acquired by Person B be based on the market value of the share on the date they passed away? | A1: Yes. | Q2: Will the first element of the cost base of the shares Person B inherited be based on their cost base at the time they passed away? | A2: Yes.

Relevant facts and circumstances: The Company was incorporated prior to 20 September 1985. The Company's shareholding consists of a specified number of shares which were issued to Person A and Person B. After 20 September 1985, Person A passed away and their shares were transferred to Person B in accordance with the deceased's will. A short time later, Person B passed away and their shares were transferred to you and your sibling as joint shareholders in accordance with Person B's will. Probate on Person B's estate was granted in the year after Person B had passed away. You and your sibling are currently the directors and shareholders of the Company. The Company's assets consist of a commercial property which is valued at $XXX,XXX, and an amount of cash. The Company's franking account balance is zero. You and your sibling want to wind up the Company because you do not have any experience or knowledge of being company directors. You and your sibling will receive cash and the commercial property owned by the Company as proceeds for the shares. The shares in the Company will be cancelled.

Relevant legislative provisions: Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Part 3-3

Reasons for decision: Summary: For you and your sibling: ● the first element of the cost base of the share originally acquired by Person B will be based on the market value of the share on the date Person B passed away; and ● the first element of the cost base of the other shares will be based on Person B's cost base on the date they passed away. Person B's cost base at the time they passed away will be the market value of the shares on the date Person A passed away.