Private ruling: Cost base of units
Ruling period: Year ended 30 June 2010.
Date scheme commenced: 1 July 1996.

Ruling: Q1: Is the first element of the cost base of the units you inherited, the market value on the date of death? | A1: 


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-70 | Income Tax Assessment Act 1997 Section 110-25 | Income Tax Assessment Act 1997 Section 110-55 | Income Tax Assessment Act 1997 Subdivision 124-M | Income Tax Assessment Act 1997 Section 128-15

Reasons for decision: Detailed Reasoning - Cost base: A legal personal representative (LPR) or a beneficiary is taken to have acquired the asset on the day the deceased died. The table in subsection 128-15(4) of the Income Tax Assessment Act (ITAA) 1997 sets out the cost base and reduced cost base of a deceased persons assets in the hands of a LPR or beneficiary. It states that the first element of the cost base of an asset that was acquired by the deceased before 20 September 1985 (pre-CGT) is the market value on the date of death. The first element of the cost base of an asset that was acquired by the deceased on or after 20 September 1985 (post-CGT) is the cost base to the deceased on the date of death. In this case, you acquired the units on the date of death. The first element of the cost base for the units is the cost base of the deceased at the date of their death and not the market value as the units were acquired after 20 September 1985 (post-CGT). The initial cost base (or reduced cost base) of the units was their market value on the date in 199z ($X per unit). This will need to be adjusted to take into account non assessable distributions received and bonus units issued. | Detailed Reasoning - Cost base adjustments: Included in the reduced cost base of an asset is certain expenditure that you incur in relation to that asset. The cost base is reduced by any amount you can claim as a deduction. CGT event E4 happens when you receive non-assessable distributions. These non-assessable distributions affect the cost base and reduced cost base of your units. The following amounts will effect the cost base of the units: · tax free amounts · tax deferred amounts Tax free amounts and tax deferred amounts may require the cost base of your units to be adjusted. Where a capital gain has been incurred add the tax deferred amounts received before 1 July 2001 and deduct the total from the cost base. Tax free amounts are only removed from the cost base when a capital loss has been incurred. | Detailed Reasoning - Bonus Units: Bonus units are additional units a unit holder receives as a dispersal in whole or in part. The paid up value of bonus shares issued is not taxed as income unless part of the dispersal was paid in cash or paid as part of a trust dispersal reinvestment scheme. The cost base of the bonus units is calculated by apportioning the amounts paid for the original units between the original units and the bonus units. Effectively, this results in a reduction of the base of the original units.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You inherited an investment in a trust. | The units in the fund were acquired in 199x. | The market value of an ordinary unit in 199z was $X. | You were subject to a compulsory buy back of part of the fund.