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Do legal costs incurred by the executor of a deceased estate in defending a claim alleging negligence in drawing up the Will of another family member of the deceased and also defending an action to remove them as trustee of another family member's estate, form part of the cost base of the estate's assets pursuant to subsection 110-25(6) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. These legal costs do not form part of the cost base of the assets of the deceased under subsection 110-25(6) of the ITAA 1997. However, they may form part of the cost base of assets of the other deceased estate.

The taxpayer is the executor of a deceased estate.

The taxpayer, in their capacity as solicitor for the late taxpayer's family, also performed other duties, including action as executor for the estates of other deceased family members.

While acting as executor of the estates of the other family members they defended a claim they were negligent in the drawing up of another's will and also another action seeking to remove them as a trustee of the other estate concerned.

These expenditures have not been incurred by the taxpayer in their capacity as the executor of the deceased estate in question. Hence, as the 'legal personal representative' of this deceased estate, they can not include them in the cost base of it's estate's assets pursuant to subsection 110-25(6) of the ITAA 1997. The expenditure may however fall for consideration as part of the costs base of the assets of the estate of the other family member subject to the legal action.