CAT & CGT double charge

[Bmd2016]

Can someone direct if this understanding is correct:

If I inherit a house from my uncle after a drawn out estate settlement and probate process,

value at date of death is €200,000
value at date of probate/valuation date €220,000

I take my inheritance and pay my CAT based on the valuation of €220,000

If I later sell the house (never live in it) for say €300,000, I am charged CGT on the sale price €300,000 less the value at date of death €200,000
This in effect means I am paying 33% twice on the €20,000 increase in value from date of death to the valuation date...
Thre is no CGT/CAT credit as it is not the same event..

 

[ClubMan]

I take my inheritance and pay my CAT based on the valuation of €220,000

If I later sell the house (never live in it) for say €300,000, I am charged CGT on the sale price €300,000 less the value at date of death €200,000

Isn't the effective acquisition base cost €220K rather than €200K in this situation so CGT is calculated on €300K - €220K and there's no double taxation issue?

 

[Bmd2016]

All I can see mentioned is date of death, here is an article that mentions it:

https://www.irishtimes.com/property...ted-property-how-do-i-calculate-the-tax-owed/

 

[Brendan Burgess]

I would not be relying on newspaper articles. There may be differences between them and your case which are not obvious.

Some solicitors understand CAT and CGT so should know the answer.

If not, they should refer you to a tax specialist.

I see that the answer to the Irish Times question was from Suzanne O’Neill is a tax partner at RSM Ireland Maybe contact her for advice.

Brendan

 

[AAAContributor]

If I later sell the house (never live in it) for say €300,000, I am charged CGT on the sale price €300,000 less the value at date of death €200,000
This in effect means I am paying 33% twice on the €20,000 increase in value from date of death to the valuation date

Your understanding is correct - a double charge to tax can arise in these types of situations - but as mentioned above, get professional advice.

The principles to the best of my knowledge are:-

Section 573(2)(a) of the Taxes Consolidation Act (TCA) 1997 (the TCA being the legislation governing the charge to CGT) states that the person to whom the assets pass is deemed to acquire them at their market value at the deceased's date of death. Any gain in the value of the property from the date of death to the date the asset is passed to the person entitled by the personal representative is ignored.

The person entitled to the asset is deemed to have acquired the asset at the same value and date as the personal representative acquired the asset. No CGT arises on the transfer of the asset from the personal representative to the person entitled, as per Section 573(5) TCA.

For the charge to inheritance tax, one looks to a different book of legislation: Capital Acquisitions Tax Consolidated Act (CATCA 2003). The beneficiary is charged to CAT based on the market value at the CAT valuation date.

One thing to look at with your legal/tax professional - if there was a drawn out estate settlement and probate process, you (as legatee) should see if there was any expenditure incurred by the personal representatives in transferring the asset to you so that you can add it to the asset's base cost (for the purposes of calculating the CGT - Section 552(5) TCA refer).

 

[Joebloggs]

Hello

I have a similar query to the OP if I may please. We will be getting professional advice from an accountant soon but would like to research it beforehand.

Just wondering if my understanding is correct here. Would appreciate any advices.

House inherited by nephew from late Uncle. Nephew has exhausted his Group B threshold for Inheritance Tax due to a previous Inheritance in the same category so he will have to pay 33% tax on this Inheritance.

There are no other assets in the Estate. The nephew is both the Executor and beneficiary.

House valued at date of death €200k and submitted to Revenue on the SA2.

3 years later (a long complicated story) Grant of Probate issues. House probably now worth €300k appx.

My question :

a. If nephew holds on to the house and moves in himself, does he pay Inheritance Tax on the €200k @ 33% = €66k and that satisfies his liability to Revenue in full ?

b. If nephew sells the house for €300k, does he pay Inheritance Tax on the €200k @ 33% = €66k and Capital Gains Tax on the €100k gain @ 33% = €33k, making a total due to Revenue of €100k (being made up of 2 different tax types).

If my understanding is correct, then would it be more advantageous for him to move in to the house as his main residence ?

Thanks for any advices.