Is CGT deductible in arriving at the taxable value of an inheritance?

Is CGT deductible in arriving at the taxable value of an inheritance? For example,a property (domestic dwelling) increased in value from the date of death of the disponer (i.e. the value specified in the CA24 form) and the date the property was sold by the executors. It is my understanding that the executors must pay CGT on the increase in value of the property. When the estate (i.e. proceeds of sale of the dwelling plus bank a/cs) is being distributed to the beneficiaries is this CGT deductible in arriving at the taxable value of the inheritance?



The long version of the IT38 form implies it is, i.e. Part 8 section 8 Credits deductible allows the deduction of CGT in calculating the net tax payable. So for the short form, i.e. IT38S, can the CGT paid and legal fees etc. be deducted from the amount the beneficiary receives to arrive at the taxable value of the inheritance?

Does this help?

http://www.revenue.ie/en/tax/cat/guide/credit.html

I'm afraid my eyes glaze over when I have to deal with anything tax related but that says:

Capital Gains Tax arising on the disposal of assets in the course of administration of an estate does not arise on the actual inheritance, which is the event that gives rise to Capital Acquisitions Tax. Therefore, a credit for Capital Gains Tax is not given. The amount of Capital Gains tax paid may however be deducted as a liability in arriving at the taxable value of the inheritance.

mf

Remember also that you may be entitled ( assuming no beneficiary has taken benefit in possession) to use the value as of the grant of probate rather than the date of death, which may be higher, therefore less or no CGT.

PMU,

Yes, CGT payable by the estate is deductible in arriving at taxable value of inheritance (as MF1 points out).

The executors are responsible for paying and filing CGT on assets in the administration period.

For example, A dies and instructs in their will that their house be sold and proceeds distributed to B & C equally. In CA24, house is valued at 150k (value at date of death). House sold by executors six months later for 200k. Executors must pay 16.5k in CGT (200-150 @ 33%). Leaving 183.5k to distribute in the estate. Say for convenience, solicitors & auctioneers fees are 3.5k, then B&C divide 180k between them - the taxable value of their inheritance is 90k each.

Zacchaos said:

Yes, CGT payable by the estate is deductible in arriving at taxable value of inheritance (as MF1 points out).

For example, A dies and instructs in their will that their house be sold and proceeds distributed to B & C equally. In CA24, house is valued at 150k (value at date of death). House sold by executors six months later for 200k. Executors must pay 16.5k in CGT (200-150 @ 33%). Leaving 183.5k to distribute in the estate. Say for convenience, solicitors & auctioneers fees are 3.5k, then B&C divide 180k between them - the taxable value of their inheritance is 90k each.

Click to expand...

Thank you. Initially, I was looking at the long version of the IT38 form, and, e.g. using the figures in your example and say 1 beneficiary to make the calculations easier,, you declare (section 7 Taxable Value of Benefit) an Absolute Interest of 200,000, deduct costs of say 3.5k to get a Taxable Value of 196,500. Then in part 8 Self Assessment you deduct the Group Threshold (i.e. 15,075) to arrive at a Taxable Excess of 181,425. This gives a tax payable of 59,870. You can then in section 8.8. Credits Deductible deduct CGT paid, i.e.16.5k, giving you Net tax payable of 43,370.


But if the CGT paid is deductible not as a tax credit but in arriving at the taxable value of the inheritance the figures are Absolute interest-legal fees-group threshold-CGT paid giving a taxable value of (200,000-3.500-15076-16500)=164,925 on which CAT of 54,425 would be payable. Which is a significant difference.


In my case, the beneficiaries, who are all young people, were sent the short IT38S form by Revenue and have asked the executors to calculate how much CAT they must pay, so if CGT paid is deductible in arriving at the taxable value of the inheritance and not deductible as a tax credit they pay a higher amount in tax?

The credit for CGT is given when CGT and CAT arise on the same event... (usually crops up where someone gifts and asset).

Revenue's comments on credit for Capital Gains Tax on an Inheritance:

"Where assets are disposed of in the course of the administration of an estate, a credit for Capital Gains Tax cannot be claimed against Inheritance Tax, as the Capital Gains tax does not arise on the same event. However, Capital Gains Tax paid in such circumstances may be deducted as a liability in order to arrive at the taxable value of the inheritance."

So you're looking at the higher amount.

Zacchaos said:

The credit for CGT is given when CGT and CAT arise on the same event... (usually crops up where someone gifts and asset).

So you're looking at the higher amount.

Click to expand...

I was afraid of that. Thank you all.