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Distributing losses realised in an Estate to beneficiaries

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Hello

Just enquiring if losses realised in an Estate can be distributed to beneficiaries on the wind up of the Estate.

The losses were realised in the Estate and not carried forward from the Testator.

Many thanks

TO

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Hi @TO

 

Welcome to our Community!

 

As a basic principle, trusts and beneficiaries are different taxpayers.Trusts cannot pass on losses that the trustee has incurred to beneficiaries. At a particular stage of administration of he deceased estate- when it is ‘fully administered’ for tax purposes, the beneficiary has to declare its share of income of the trust to which it is ‘presently entitled’. In this case, as the estate was fully administered in the year of date of death, any amounts of present entitlement to deceased estate income or capital gains during the year will be accepted as being taxed to the trustee where received by the trustee after death and prior to the estate being ‘fully administered’- and alternatively taxed to the beneficiaries if received by the trustee after the fully administered date and up to the end of the income year. Consistent with this approach, it would seem reasonable to treat losses incurred by the trustee on the same basis of when they are incurred.  See paragraphs 21 and 22 of IT 2622.

 

Thanks, JodieH. 

 

 

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Most helpful response

ATO Certified Response

Former Community Support

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Hi @TO

 

Welcome to our Community!

 

As a basic principle, trusts and beneficiaries are different taxpayers.Trusts cannot pass on losses that the trustee has incurred to beneficiaries. At a particular stage of administration of he deceased estate- when it is ‘fully administered’ for tax purposes, the beneficiary has to declare its share of income of the trust to which it is ‘presently entitled’. In this case, as the estate was fully administered in the year of date of death, any amounts of present entitlement to deceased estate income or capital gains during the year will be accepted as being taxed to the trustee where received by the trustee after death and prior to the estate being ‘fully administered’- and alternatively taxed to the beneficiaries if received by the trustee after the fully administered date and up to the end of the income year. Consistent with this approach, it would seem reasonable to treat losses incurred by the trustee on the same basis of when they are incurred.  See paragraphs 21 and 22 of IT 2622.

 

Thanks, JodieH.