There has been confusion around the application of the Bright Line Test and when it is triggered, particularly when concerned with inherited property. IRD has released an amendment to clarify the tax treatment around this murky area.
Tax Treatment
Inherited residential land is exempt from the Bright Line Test. Under S FC 9(2), the bright line test does not apply to the transfer of land to the executor or administrator following the death of a person. It will also not apply in the event where the administrator/executor/beneficiary decides to sell the land.
Section FC 9 explains that if the recipient disposes of the land and derives an income, then they take on the deceased persons acquisition date and cost. This section has often caused confusion and so the bill proposes to amend this section along with CB 6A(2B) and CZ 39(7) to make this clear.
If you are inheriting a property and require assistance with your tax obligations, reach out to us below.
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