Private ruling: CGT - deceased estate - asset passing to tax-advantaged entity
Date of advice: 25 July 2024
Published: 2 September 2024
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does capital gains tax (CGT) event K3 occur upon the in-specie transfer of the shares to beneficiaries, under the provisions of the Will, when the beneficiaries in question are exempt entities under section 50 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Will any capital gains subject to CGT event K3 (and thus deemed as happening immediately prior to the death of the taxpayer), resulting from the in-specie transfer of shares to the deductible gift recipients, be disregarded in the date of death return under subsection 118-60(1) of the ITAA 1997, as the transfer of property would have been deductible under section 30-15 of the ITAA 1997 if it had not been a testamentary gift? | A2: Yes. CGT event K3 occurred when the Deceased's assets passed from the Deceased Estate to the institutions, which are all exempt entities and deductible gift recipients. The time of the CGT event K3 was just before the Deceased passed away. The Deceased would have been entitled to a deduction for the gift of their assets to the institutes had a gift been made to any of them during their lifetime. Therefore, any capital gains or losses made from CGT event K3 happening are disregarded when the Deceased's assets pass to the three institutions in accordance with the Deceased's Will under subsection 118-60(1) of the ITAA 1997.

Relevant facts and circumstances: The Deceased, who passed away after 20 September 1985, held shares in various entities prior to their passing. Probate on the Deceased's Estate was granted to the persons named under the deceased's Will (the Will) as the Trustees of the Deceased Estate. The Will provided for the Trustees of the Deceased's Estate to pay or transfer the residuary estate to specified institutions (the Institutions) in equal shares: The Institutions are: • Exempt entities under section 50-1 of the ITAA 1997 ; and • Endorsed deductible gift recipients covered by item 1 of the table in section 30-15 of the ITAA 1997. The shares were distributed in-specie from the Deceased Estate to the Institutions during the ruling period in accordance with the Will.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 30 | Income Tax Assessment Act 1997 Division 50 | Income Tax Assessment Act 1997 Section 104-215 | Income Tax Assessment Act 1997 Section 118-60 | Income Tax Assessment Act 1997 Section 128-10