Private ruling: Capital Gains Tax - Deceased Estates
Published: April 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

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: The deceased passed away in the relevant financial year. The children of the deceased and a Solicitor were appointed Executors of the Will. The deceased's main residence (the property) was purchased in 19XX. A search for the Land Title Deed for the property proved unsuccessful. The Land Title Office advised Conveyancing Company X had the original deed, which was then passed to Finance Company X who returned the deed to the deceased via registered mail in 200X. The Post Office was contacted with the registered mail tracking number however records did not extend back that far. First probate was granted in the subsequent financial year. Conveyancing Company X commenced an application for a Substitute Land Title Deed in the subsequent financial year. However, the Solicitor (an Executor) declined to co- sign the application for a Substitute Land Title Deed, or any further documents. Despite attempts at reconciliation between the Executors, no resolution could be reached, and the Solicitor (an Executor) stated legal advice was needed to have them renounced as Executor. Legal action was taken in the subsequent financial year to have the Solicitor (an Executor) renounced in a Supreme Court. The Solicitor (an Executor) was renounced as Executor late in the 20XX financial year. Second probate was granted late in the 20XX financial year. The property was listed with real estate agents for sale in the 20YY financial year. A Substitute Land Title Deed was issued in the 20YY financial year. A sale of contract was signed and the property settled late in the 20YY financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1).

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee or beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling if the property was acquired by the deceased before 20 September 1985, and your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: • the ownership of a dwelling or a will is challenged, • the complexity of a deceased estate delays the completion of administration of the estate, • a trustee or beneficiary is unable to attend to the deceased estate due to unforeseen or serious personal circumstances arising during the two year period (eg the taxpayer or a family member has a severe illness or injury), or • settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for reasons outside the beneficiary or trustee's control. In this case, there were delays in disposing of the property due to the missing the Land Title Deed. Further delays were encountered when an application for a Substituted Land Title Deed was commenced but there was a falling out with one of the Executors. Despite lengthy attempts at reconciliation, one of the Executors was subsequently renounced in the Supreme Court. The remaining Executors obtained a Substitute Land Title Deed in the 20YY financial year, listed the property for sale and the property was sold late in the 20YY financial year. Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.