A husband passed away in 1985 and left his wife a house, House 1, to live in. Later, in 1989, the wife sold House 1 to buy a new house, House 2. In 1996, she wanted to move back to Sydney and buy another house, House 3. However, there wasn't enough money, so the executors of the husband's estate let their son A buy a part of House 3. The estate bought the rest, and the wife and son lived there. They signed a legal agreement, called a deed of family arrangement, to document this.
When the wife passed away in 2015, son A bought the estate's share of House 3 as per the agreement.
Regarding taxes, normally the main home exemption wouldn't apply to the husband's estate because House 3 wasn't his main home or asset. But there's a chance it could apply because the estate bought House 3 for the wife to live in.
However, this depends on legal advice and possibly a court order. It's important to look at the husband's will and whether the terms of the family arrangement are legally binding.
For son A, he has two properties to consider for Capital Gains Tax (CGT) — his share in House 3 from 1996 (Asset 1) and the share he bought from the estate in 2015 (Asset 2). He can claim the main home exemption if he lived in House 3 during certain times when he sells these properties.
Got questions? Reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment on our live calendar.
