CGT/Inheritance Tax

john luc said:

I explained poorly,my sister died and left no will and so her asset was her house that under the rules of administration passes to my mother. The house had an unprotected mortgage on it so the house needed to be sold to pay this off and then the proceeds left to my mother. At date of death the house was valued at €155K however we made some repairs to it and it has sold now for €225K. The repairs were paid by my mother.

My question was do I as administrator have to pay out from the estate for the capital gain and then my mother have to secondly deal with the remaining proceeds as CAT.

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The answer to your question is yes.

An allowance for CGT paid against CAT is available under section 104 of the Capital Acquisitions Tax Consolidation Act 2003.

However, as Joe_90 advised, this does not apply in your case.

What kind of repairs were carried out before the sale?

The repairs were €15K fees were €7K and the mortgage was €95K which had to be paid from the sale of the house.

For CGT purposes, what type of repairs were carried out?
What amount did your mother actually inherit?

The repairs at €15K were to replace a faulty roof extension with a new one. With having to pay off the mortgage of €95K and the relevant fees at €7K meant that there was not a lot left and so having to pay CGT knocks another hole in it. My mother did not live with her.

It doesn't seem that bad.

CAT of roughly €10k.

CGT of roughly €16k.

Outlay of €22k.

Clear the mortgage of €95k and your Mum's left with roughly €82k.

The inheritance was only worth €60k originally.

As my Mother is the sole beneficiary she is entitled to cat A allowance here so no tax is due however having to apply CGT first means that the thieving government is getting their hands on family assets that have already being taxed throughout the lifetime.

john luc said:

As my Mother is the sole beneficiary she is entitled to cat A allowance here so no tax is due however having to apply CGT first means that the thieving government is getting their hands on family assets that have already being taxed throughout the lifetime.

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The gain isn't "throughout the lifetime" though, that's the whole point. The gain that's taxed is the gain in the period of administration. If the estate didn't sell the asset and just passed it on to the beneficiary it wouldn't owe any CGT.

I understand your point its the fact that the government gets to take a chunk of a family asset is the issue that is bugging me. Its a painful story and the fact that my sister died and her house has returned to a value still not near the value it was when she had to mortgage it to send someone packing and now because of the CGT v CAT rule means that a higher amount will be grabbed by the government

john luc said:

I understand your point its the fact that the government gets to take a chunk of a family asset is the issue that is bugging me. Its a painful story and the fact that my sister died and her house has returned to a value still not near the value it was when she had to mortgage it to send someone packing and now because of the CGT v CAT rule means that a higher amount will be grabbed by the government

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Um, yeah, ye'd be better off if it didnt increase in value because then there wouldn't be any tax due...

Without wanting to appear indelicate, I have an issue with this concept of a "family asset" - I wonder is it just an Irish thing, this obsession with particular property.

I have very fond memories of my childhood in our family home, but my parents later divorced and my dad subsequently gutted and remodelled it.

He's always at pains to tell my siblings and I we won't be getting any inheritance, that he's going to spend every penny and enjoy it while he can. Fair play to him I say. My "asset" is the memories, and the place in time, not the physical place.

The only way to avoid the tax would have been to have it valued in anticipation of its future higher value, by recognising property prices are going up again. You could have even over-estimated it as there are no real negatives to doing so.