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Do legal costs incurred by a solicitor, who subsequently becomes a taxpayer's executor, before the death of a taxpayer form part of the costs base of assets of the deceased taxpayer's estate pursuant to subsection 110-25(6) of the Income Tax Assessment Act 1997 (the ITAA 1997)?

No. Expenses incurred before a taxpayer's death by a solicitor who later becomes the executor of the deceased estate do not form part of the cost base of the estate's assets under subsection 110-25(6) of the ITAA 1997.

The taxpayer is the executor of a deceased estate. They also acted as a solicitor for a client before their death and for other members of the deceased's family.

Before the client died, the taxpayer's duties as solicitor included seeking a declaration that interests in an asset pass to the client and also that another family member record payments in respect of an asset sold.

Both these matters were finalised before the client died and the taxpayer's duties as the executor of the estate in question commenced. Hence any direct costs incurred may fall for consideration in the costs base of the deceased assets before their death, that is, before they devolved to the taxpayer in their capacity as executor of her estate.

Accordingly, this expenditure can not be claimed under subsection 110-25(6) of the ITAA 1997 by the taxpayer in their later capacity as the executor of the deceased's estate.