Hi Debden,

Was the property bought before the 20th september 1985? If it was that means it was a pre-CGT asset which means that if you sell the property within 2 years of death or the inherited property was used by your friend as the main residence from the date of the deceased death until when it was sold by your friend then you do not have to pay any CGT regardless whether the property was used as IP before the death of deceased.

If the Pre CGT asset was not sold after 2 years then CGT would apply, but the cost base will be the market price at the date of death of the deceased.  

However if it was purchased after the 20th Sept 1985 and the property was purchased as Investment Property and earn rental income all along then your friend would not qualify to get main residence exemption and will inherit the deceased cost base to determine the Capital Gain.

If the property was used as a main residence before death and was purchased after the 20th Sept 1985, then if it was sold within 2 years and the dwelling was used as main residence by the beneficiary, then the beneficiary would be exempt from CGT.
Hope that Helps.

Thomas Ho

"If it is to be, it is up to me"