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Where: • a foreign government asserts ownership of a capital gains tax (CGT) asset owned by a non-resident individual under a 'nationalisation' program • the individual dies intestate, and • the nationalisation is later declared and acknowledged to have been void and without effect

is a resident taxpayer who gains title to the CGT asset as beneficiary of the deceased individual's estate taken for CGT purposes to have acquired the asset on the date of death of the deceased?

Yes. The CGT asset passed to the taxpayer in their capacity as beneficiary of the deceased individual's estate in accordance with the intestacy laws of the relevant jurisdiction. Under section 128-15 of the Income Tax Assessment Act 1997 (ITAA 1997), the CGT asset is therefore taken to have been acquired by the taxpayer on the date of the deceased's death.

The taxpayer's parent owned a property outside of Australia, which they acquired more than 70 years ago.

The country in which the property was located was occupied by the Soviet Communist regime from 1940 to 1990.

In 1940, the Soviet regime passed a decree under which it purported to 'nationalise' all private property including the parent's property.

The taxpayer's parent died intestate shortly after the decree was passed.

When the country regained its independence a restoration program was initiated under which the former owners and their legal successors could apply to reclaim property purported to have been 'nationalised' under the Soviet Decree. Under the restoration program, legislation was passed under which the original Soviet Decree and the normative acts issued in accordance with it were declared and/or acknowledged to be null and void.

The taxpayer lodged an application asserting their right to reclaim ownership of the property in their capacity as their parent's legal successor according to the intestacy laws of the relevant jurisdiction. The Government accepted their application and certified their legal title to the property.

The taxpayer was, at all relevant times, a resident of Australia.

Section 128-15 of the ITAA 1997 sets out the rules regarding the effect of death on a CGT asset that you own just before dying. Subsection 128-15(1) of the ITAA 1997 in conjunction with subsection 128-15(2) of the ITAA 1997 states that if a CGT asset you own just before your death devolves to your legal personal representative or passes to a beneficiary in your estate, the legal personal representative or the beneficiary is taken to have acquired the asset on the day you died. Subsection 128-20(1) of the ITAA 1997 provides, relevantly, that a CGT asset passes to a beneficiary where the beneficiary becomes the owner of the asset under a will or by operation of intestacy law.

In the present case, the decree under which the CGT asset was purported to be 'nationalised' was acknowledged and declared to be null and void and without effect. It follows, therefore, that the CGT asset is taken to have been among the assets owned by the deceased at the time of their death and was therefore part of their estate.

As the taxpayer reclaimed ownership in their capacity as beneficiary of their parent's estate in accordance with the intestacy laws of the relevant jurisdiction, it is concluded that the CGT asset 'passed' to the taxpayer as beneficiary of that estate under section 128-15 of the ITAA 1997. Under subsection 128-15(2) of the ITAA 1997 the taxpayer is taken to have acquired the CGT asset on the day their parent died.