Capital base of related party purchase

Hi there,
Have a question regarding capital base for the purchase of a property from related parties.
Parent had passed away and 2 x grandchildren purchased their Parents property she lived in from their grandfather for $200k, market value at time of purhcase was $650k.

Because it's a purchase between related parties and the price is significantly lower than market value, is the capital base when determining CGT calculated at market rate, or purchase price? Assuming the property was used as an investment property.

 

The market value is to be used at the time of the contract to transfer when non-arms length persons conduct a transaction on non-arms length terms. Same with stamp duty and OSR will require a valuation to be submitted with the transfer. The solicitor would advise on that.

s118-30 ITAA1997

example - Nanna sells her former home to Peter (her Grandson) for $1. The property has a value of $450K. For tax purposes Peter and Nanna assume that the value is $450K when 1) Nanna determines her CGT calc and 2) Peter uses that as his costbase + stamp duty + legals etc

Are you aware of the 2 year death rule ?? This may mean any change in the value held after death is not taxable to grandpa and is ignored.

 

Thanks for the response.
It's a tad complicated as property originally bought by Mother, then sold to grandfather due to financial problems in 2007 with a buy-back clause which was never acted on. Grandkids acted on the buyback clause after death.

 

There could be a CGT issue to amend for the 2007 year. It is a tad complicated.
The complicated part is I'm unsure how a contract can be made after death. Contracts normally end with death or mental capacity etc

 

Cost base is what you are after.
market value substitution rule for 2007 and now - depending on the details.

 

The 2007 arrangement had nothing to do with grandkids. So potentially it'd just be the market value at time of purchase last year that is the cost base?

 

Cost base for the kids would be value when transferred to them probably. Seek specific advice