Private ruling: Capital gains tax for deceased estates
Date of advice: 27 October 2016
Published: February 2017
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will any capital loss or gain that arose from the transfer of the property from the trustees to the beneficiaries be disregarded? | A1: Yes

Relevant facts and circumstances: The deceased passed away in 20ZZ. The will directed the trustees to sell the real and personal property and pay the proceeds to the beneficiaries in equal shares after the payment of certain debts. Instead of selling the property, the trustees transferred the property to the beneficiaries. The property was then sold to a third party in September 20XX and the proceeds split equally.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 128-15 | Income Tax Assessment Act 1997 section 128-20

Reasons for decision: Summary: Division 128 of the ITAA 1997 contains rules that apply when an asset owned by a person just before they die, passes to their legal personal representative or to a beneficiary in a deceased estate. Subsection 128-15(3) of the ITAA 1997 provides that any capital gain or capital loss the legal personal representative makes if the asset passes to a beneficiary of a deceased estate is disregarded. Under section 128-20 of the ITAA 1997, an asset passes to a beneficiary in a deceased estate if the beneficiary becomes the owner of the asset: (a) under a will, or that will as varied by a court order, or (b) by operation of an intestacy law, or such law as varied by a court order, or (c) because it is appropriated to the beneficiary by the deceased legal personal representative in satisfaction of a pecuniary legacy or some other interest or share in your estate, or (d) under a deed of arrangement if: (i) the beneficiary entered into the deed to settle a claim to participate in the distribution of the deceased estate, and (ii) any consideration given by the beneficiary for the asset consisted only of the variation or waiver of a claim to one or more other CGT assets that formed part of the estate. In this case the trustees transferred the property to the beneficiaries to satisfy their interest or share in the estate. As such, subsection 128-15(3) of the ITAA 1997 will apply to disregard any capital gain or loss resulting from this transfer.