Deceased Estate and Capital Gains

[Rygor]

I was wondering if anyone has any experience with a selling a deceased estate property and Capital gains tax implications. The situation is:

* I inherited a pre-1985 purchased PPOR property.
* I am the executor and beneficiary
* The property was transferred into my name by the solicitor and was subsequently sold and settled around 14 months after death
* Property is in NSW if that makes a difference

From reading the ATO website and talking to the accountant, I am getting conflicting information.

When the property was transferred into my name, there is no CG. From the ATO website, it says as it was a pre-1985 property my ownership date for calculating CG is the date of death.

However, on another page of the ATO web site, it says if it is a pre-1985 property and is sold within two years of death, there is no CG.

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Gifts,-inheritances-and-deceased-estates/Inheriting-a-dwelling/?page=3#Deceased_died_on_or_after_20_September_1985

The accountant says there will be CG involved.

Does anyone know if i will or won't be up for CG on the disposal of the property?

Thanks.

 

[Rob G.]

From your facts (Pre-CGT or PPOR of deceased) it looks like a straightforward application of s.118-195.


However, your accountant would be in possession of far more facts than available in your posting.

 

[Rygor]

Hi Rob,

If I read s.118-195 correctly, then I have a case of exemption? It was a PPOR of the deceased and was purchased pre 1985. It was not my PPOR but it has been sitting idle until it was sold within the two year period.

The accountant had this information but wasn't sure. He said he contacted the ATO who claimed it was subject to CGT hence my confusion.


Thanks.

 

[Paul@PFI]

If the asset was a pre-CGT main residence of the deceased then you would have acquired this asset at its market value at the date of death of the deceased. Item 1 of s118-195 allows a POST CGT residence to satisfy the two year extended CGT exemption. A pre-CGT asset is different.

The cost base may be modified by some estate legal expenses. These legals aren't deductible but they impact on the cost base and may increase your cost base (and reduce any potential CGT)..This is OFTEN overlooked.

The words that describe the use of columns 2 + 3 of the schedule in s118-195 needs to be read and understood. This would require tax advice specific to your facts.

 

[Rob G.]

You sold an asset within 2 years of death of testator.

If it is either a pre-CGT asset of the deceased OR it was the main residence of the deceased just before death (and not used to earn income at that time), then it should be exempt.

The tests are in the alternative. At least one item from column 2 and at least one item from column 3.

You appear to have 2 items from column 2 and 1 item from column 3 (sale within 2 years).

However, as previously cautioned we do not have the full facts.

 

[Rygor]

Hi Paul,

I also found this link which appears to be more of the opinion pre-1985 purchase (col 2)and sale and within 2 years (col3) is a valid usage combination of that table.

http://www.omegapartners.com.au/2011/07/property-inheritance-and-taxes/