Private ruling: Deceased estates and the disposal of a dwelling
Date of advice: 20 December 2019
Published: February 2020
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Will the capital gain made on the disposal of the executors' ownership interest in the dwelling be disregarded under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. The capital gain will be disregarded under subsection 118-195 (1) of the ITAA 1997 because: · The dwelling was owned by the executors in their capacity as trustees of the deceased's estate · The deceased acquired the dwelling after 20 September 1985 · The dwelling was the deceased's main residence just before the deceased's death · The dwelling was not used to produce assessable income and · From the time of the deceased's death until the executors' ownership interest ended, the dwelling was used by an individual who had the right to occupy the dwelling under the deceased's will.

Relevant facts and circumstances: The deceased died on XX March 20XX. The deceased lived in a dwelling. The dwelling was the deceased's main residence. The dwelling was acquired after 20 September 1985. Probate was granted on XX July 20XX. The executors were appointed under the will. At no point during the deceased's nor the executors' ownership was the dwelling used for the purposes of earning assessable income. Per the terms of the deceased's will, a trust fund (The Fund) was set aside for the benefit of the deceased's disabled child. The Trust Fund consists of the dwelling and any related property stemming from the disposal of the dwelling. The executors are required to hold The Fund on trust for the deceased's child and ensure that they are provided with comfortable and appropriate accommodation out of The Fund. The terms of this trust arrangement gave the deceased's child the right to reside at the dwelling or at another dwelling as provided by the trustees under the terms of The Fund. Accordingly, upon the deceased's passing, their child lived in the dwelling as their main residence. Due to the deceased's child's health issues, the dwelling was sold and a substitute property purchased for use. Settlement of the sale of the dwelling occurred on XX May 20XX. From the time of the deceased's death until settlement the dwelling was used by the deceased's child as their main residence. The sale of the dwelling has resulted in a capital gain.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-195