Private ruling: Capital gains tax - deceased estate -extend the two year period - main residence
Date of advice: 2 May 2017
Published: September 2017
Ruling period: Year ended 30 June 2016.
Date scheme commenced: 1 July 2015.

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: In 201X, the deceased passed away. An executor was named as the substitute executor. Probate was grated approximately one year later. The deceased owned a property that was their main residence. The property housed a number of valuable items and artworks which were disposed of prior to the sale of the property. The property was listed on the market immediately after all the items were cleared out. The property was eventually sold in 201Y with settlement occurring after two years from the date of the deceased death.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until DDMMYY. | Detailed Reasoning - Detailed reasoning: The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person's estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: ● Acquired by the deceased before 20 September 1985, or ● The deceased's main residence when they died. The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the Will is challenged). There must not be any other factors mitigating against exercising it. The delay in disposing of the dwelling was due to a combination of factors including, a delay in the grant of probate and the complexity of the deceased estate and large number of chattels. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.