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_Samis(Newbie)Newbie
2 June 2021

A block of land in Melbourne purchased in 1929 by my grandfather was passed on to my mother in 1999 on his death.

She passed away late 2020, my father passed away in 2011. Three months prior to her death my brother, using her power of attorney sold the land for $700,000, payable in March 2021. He and I share 50/50 in our mother's net estate.

The block of land was rented for $650/month with the tenant paying all outgoings.

My mother was a pensioner and had not lodged a tax return for more than 20 years. This was her only other income.

My solicitor has told me that I do not have any capital gains tax liability.

But I am wondering if the estate of my mother should become registered for tax and pay capital gains tax on the profit made by the estate, which presumably in simple terms would be the excess of the $700,000 over its deemed value on inheritance in 1999? Even though at the date of her death, payment for the land she owned had not been made?

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Most helpful replyATO Certified Response

_KaraBATO(Community Support)Community Support
ATO Certified Response4 June 2021

Hello @Samis,

I am very sorry for your loss.

Working out when and who pays a capital gain on an inherited asset can be tricky. I would like to offer you come information from our website to help to work this out.

You are correct in thinking that the sale of the block of land is capital gains tax (CGT) assessable.

When your mother inherited the block of land she held it for longer then two years and used it to produce an income. This made the land CGT assessable.

CGT is not payable when the land is inherited but when it is sold. This is called a CGT event.

CGT is payable when a CGT event occurs. The time of the CGT event is when the contract was signed for the sale of the land.

This means that if your mothers net capital gain was more then her tax free threshold, any CGT payable would be reported on her final tax return rather than on the estate return.

If required your mother's legal personal representative would complete this return on her behalf and the tax liability would be paid by your mothers estate.

Working our your mothers payable capital gain:

Capital gain is worked out by taking the cost base away from the proceeds and applying any allowable discounts.

The cost base for the block of land includes the market value of the property at the time your mother inherited it, and any other cost base item applicable. Please see what is the cost base on our website for a list.

As you mother held the block of land for more than 2 years the 50% discount method is applicable. For more information on available discounts please see Three methods see calculating capital gains on our website.

I hope the helps. Please let us know if you have any further questions.

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Most helpful replyATO Certified Response

_KaraBATO(Community Support)Community Support
ATO Certified Response4 June 2021

Hello @Samis,

I am very sorry for your loss.

Working out when and who pays a capital gain on an inherited asset can be tricky. I would like to offer you come information from our website to help to work this out.

You are correct in thinking that the sale of the block of land is capital gains tax (CGT) assessable.

When your mother inherited the block of land she held it for longer then two years and used it to produce an income. This made the land CGT assessable.

CGT is not payable when the land is inherited but when it is sold. This is called a CGT event.

CGT is payable when a CGT event occurs. The time of the CGT event is when the contract was signed for the sale of the land.

This means that if your mothers net capital gain was more then her tax free threshold, any CGT payable would be reported on her final tax return rather than on the estate return.

If required your mother's legal personal representative would complete this return on her behalf and the tax liability would be paid by your mothers estate.

Working our your mothers payable capital gain:

Capital gain is worked out by taking the cost base away from the proceeds and applying any allowable discounts.

The cost base for the block of land includes the market value of the property at the time your mother inherited it, and any other cost base item applicable. Please see what is the cost base on our website for a list.

As you mother held the block of land for more than 2 years the 50% discount method is applicable. For more information on available discounts please see Three methods see calculating capital gains on our website.

I hope the helps. Please let us know if you have any further questions.

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