Value of livestock to be included in assessable income at date of death of taxpayer

Can the legal personal representative of a deceased taxpayer elect under subsection 70-105(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to value livestock transferred from the deceased taxpayer at the livestock's closing value rather than its market value?

Yes. The election under subsection 70-105(3) of the ITAA 1997 can be exercised by the legal personal representative of a deceased taxpayer as they continued to carry on that business using the same livestock.

The taxpayer died in a prior income year.

The taxpayer carried on a business as a cattle farmer immediately prior to their death.

The legal personal representative of the deceased carried on the business of cattle farming during the period of the administration of the estate. The cattle were sold during the income year immediately following the year in which the taxpayer died.

Section 70-105 of the ITAA 1997 looks at the trading stock implications upon death of a taxpayer. Ordinarily, the assessable income of the taxpayer must include the market value of the trading stock at the time of death.

However, under subsection 70-105(3) of the ITAA 1997, the legal personal representative of the taxpayer can elect that a different amount be included in assessable income. They may elect that the value of the trading stock be the amount that would have been the value (under Subdivision 70-C of the ITAA 1997) as at the end of an income year ending on the date of death.

Subsection 70-105(5) of the ITAA 1997 states that an election under subsection 70-105(3) of the ITAA 1997 can only be made if the legal personal representative of the taxpayer carries on the business after the date of death and the trading stock continues to be used as trading stock in that business.

The deceased taxpayer's cattle business was being operated by their legal personal representative during the period of the administration of the estate. The cattle were not sold until the income year following the year in which the taxpayer died.

As the business was carried on after the date of death and the trading stock continued to be used as trading stock in that business, the legal personal representative can make an election under subsection 70-105(3) of the ITAA 1997.

The effect of this election is to allow the transfer of the cattle at the book value amount in the livestock account, instead of market value. This means that the amount that needs to be included as assessable income in the date of death return is the book value amount from the livestock account, calculated at the date of death.