Question

John received two properties from his deceased father (David) under a will. One property is a holiday house in Brisance and another is an investment property in Sydney. David has purchased the investment property in 1979 for $2.5m and he purchased the Brisbane property in 1990 for $2m. on the day that Davis passed ways each property had a market value of $5m. John wants to sell both properties. With reference to relevant legislation/case law discuss the CGT consequences of above arrangements?

Answer 1

CGT: Capital Gains Tax is the Tax introduced on 20, September, 1985. If due to the the death of the deceased, the benefeciary inherits the assets of the deceased, the cost base for the assets will be as follows.

If the asset is purchased by the deceased before 20 septemebr, 1980, the cost base will be the makrket value of the property on the day of death of the deceased.

If the asset is purchased after 20, september, 1980, the cost base of the inherited property to the benefeciary will be the cost paid by the deceased at the time of purchase.

In the given case, John received two propetrties from David as folows.

Holiday property purchased by David in 1990 for $2 millions.

He pirchased the investment property in 1979 for $2.5millions

MArket value of both properties at the date of death of david is $5millions.

So, the tax base for the investment property will be the market value at the time of death of David which is $5 millioons

While the cost base for Brisbane property will be the cost purchased by David which is $2 millions.

Tax Consequences:

When , John sells the property he can deduct the value of $2 millions for investment property as cost from his disposal proceeds.

While for the Investment property he can deduct the cost of $5millions from the disposal proceeds.