Yet another CGT question

Hi, long time lurker first time poster:

I was recently speaking to a relative and they raised an interesting question . Having inherited a property in 2009, previously common interest IP (50/50) , following their partners passing they received 100% interest. They recently sold the property in 2015, for a capital loss to its 2009 value.
Are they up for Capital gains tax? or does the Capital loss balance out the Capital gain?

Thanks in advance
 
A possible way to calculate capital gain/loss could be to:

1. Calculate capital gain/loss of 50% of the property from 2009 to 2015
2. Calculate capital gain/loss of the other 50% from purchase date to 2015

Capital Gain/Loss will then be the combination. Not sure though. Maybe one of the lawyers/accountants could shed some light

Cheers
Andrew
 
When you inherit an asset from a deceased estate as described you inherit that persons cost base too. So if it was bought jointly you just treat your half and double the CGT impact (since the other 50% will have same cost and date etc).

example Bill and Betty buy a factory costing $300K in 2005 as joint tenants. Betty dies in 2014 and Bill acquires 100% ownership. He sells in 2015 for $310K. Is there a gain ??
Yes. Its $10K and eligible for a 50% CGT discount. His original 50% interest is treated as if had always been 100%. Ignore the 2014 acquisition and assume it was acquired in 2005 also. Bill is 100% liable for tax on $5K.

The exception is a pre-CGT asset which this isn't.
 
A possible way to calculate capital gain/loss could be to:

1. Calculate capital gain/loss of 50% of the property from 2009 to 2015
2. Calculate capital gain/loss of the other 50% from purchase date to 2015

Capital Gain/Loss will then be the combination. Not sure though. Maybe one of the lawyers/accountants could shed some light

Cheers
Andrew

Not correct. See above post.
 
Paul - your example seems confusing.

Here is another example:

In 2000 X and Y acquire land for $80,000 as Joint tenants. They are each taken to have a 50% interest in it.
On 1 August 2013 X dies. Y is taken to have acquired the X's interest on 1 August 2013. If the cost base of X's interest on that day is $45,000 Y is taken to acquired his interest for that amount.
 
Paul - your example seems confusing.

Here is another example:

In 2000 X and Y acquire land for $80,000 as Joint tenants. They are each taken to have a 50% interest in it.
On 1 August 2013 X dies. Y is taken to have acquired the X's interest on 1 August 2013. If the cost base of X's interest on that day is $45,000 Y is taken to acquired his interest for that amount.

Except for CGT purposes Y is taken to have acquired the X's interest in the year 2000 not the date of death. This allows Y to sell within a year and still obtain the CGT general discount. The date of death is irrelevant for post CGT assets.

On death, CGT rules effectively give the beneficiary the deceased persons cost base and original date of acquisition for post CGT assets. The beneficiary also inherits X's liability for CGT too.

For joint tenancy where both parties acquired their joint interests at the same date and time its easy just to think of the owners original share and double the tax impacts since they now own two interests of 50% in the same asset wit the same acquisition date.
 
Paul that isnt correct. The joint tenant is deemed to have acquired the asset on the date of death at the cost base of the deceased on that date.

Subsection 128-15(2) of the ITAA 1997 states that the legal personal representative or beneficiary is taken to have acquired the asset on the day the deceased person died. Any capital gain or capital loss that the legal personal representative makes if the assets passes to a beneficiary is disregarded (subsection 128-15(3) of the ITAA 1997)

The cgt holding period is modified for these situations by virtue of section 114-10(6) ITAA 1997

114-10(6) If a *CGT asset you owned just before dying devolves to your *legal personal representative or *passes to a beneficiary in your estate, the 12 month rule applies to the legal personal representative or the beneficiary as if that entity had *acquired the asset when you acquired it.
 
Paul that isnt correct. The joint tenant is deemed to have acquired the asset on the date of death at the cost base of the deceased on that date.

Subsection 128-15(2) of the ITAA 1997 states that the legal personal representative or beneficiary is taken to have acquired the asset on the day the deceased person died. Any capital gain or capital loss that the legal personal representative makes if the assets passes to a beneficiary is disregarded (subsection 128-15(3) of the ITAA 1997)

The cgt holding period is modified for these situations by virtue of section 114-10(6) ITAA 1997

114-10(6) If a *CGT asset you owned just before dying devolves to your *legal personal representative or *passes to a beneficiary in your estate, the 12 month rule applies to the legal personal representative or the beneficiary as if that entity had *acquired the asset when you acquired it.


There is no deceased estate to be a beneficiary of so ss.128-15 to 25 have no relevance.

Asset passes direct under a right of survivorship.

However, s.108-7 treats joint tenants as tenants in common in equal shares. Therefore the survivors acquire new and separate CGT assets upon death of one.

The acquisition date is the date of death, s.128-50(2). So disposal within 12 months could lose the CGT discount for the newly acquired interest.

Although they acquire post CGT assets at the cost base of the deceased (s.128-50(3)), it may be a drastic simplification to assume that joint tenants all initially have the same cost base. This is more so given that they are deemed to be tenants in common.
 
I stand corrected. Thanks guys. Have located relevant references in Cooper and tagged for a refresh :eek:

I thought I made a mistake once but was wrong
 
interesting topic...I have seen people have to pay this type of CGT in the past.

What is the correct method of calculating CGT and cost bases here.
From the example: X intial cost base $40k: Y initial cost base $40k

then on X's passing the new cost base is $45k

Are they added together ? 40k+45k(new cost base) or does the tenant in common take the initial cost base as their own 40+ 40??

Sorry if this has been answered above, just looking to understand it better.

Cheers
 
interesting topic...I have seen people have to pay this type of CGT in the past.

What is the correct method of calculating CGT and cost bases here.
From the example: X intial cost base $40k: Y initial cost base $40k

then on X's passing the new cost base is $45k

Are they added together ? 40k+45k(new cost base) or does the tenant in common take the initial cost base as their own 40+ 40??

Sorry if this has been answered above, just looking to understand it better.

Cheers

Don't forget the cost base has 5 elements. It is not just the value paid for the land but can include legal costs, stamp duty etc.
 
Thanks terry. What are the remaining 5 cost elements??

Does the cost base include market value for the deceased 50% portion at the time of passing?? What i mean is, does the value of property after death get added to things like stamp duty & legal costs.

For example X & Y intially 40k each (80k inc. stamp + legal), then 10 years on property value is doubled(160k) so new cost base X & Y is 80k? is this correct ?

It's pretty confusing lol


Cheers
 
Last edited:
Thanks terry. What are the remaining 5 cost elements??

Does the cost base include market value for the deceased 50% portion at the time of passing??

or does X just take Y's original cost base?

Cheers

hi Ron - I loved your first movie, second was disappointing. Do you still have the dog that only understands Spanish?
The 5 elements are listed at
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s110.25.html

Don't forget it could include expenses while living there such as interest.

X takes Y's original cost base, but this could be modified by expenses incurred before and after the death - e.g rates paid by the executor.
 
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