CGT on 2nd Property Sale post divorce

[inlander]

Hi
Trying to understand if liable for CGT in below scenario.

1993
Dublin House purchased and jointly owned by married couple and lived in as PPR.

2004
Cavan house purchased ( jointly owned) which became couple's PPR. Dublin House rented out, registered with PRTB, Revenue Returns paid etc.
Dublin house value at approx 300k when couple moved out.

2007
Couple Seperate. Wife remains in Cavan house.
Dublin house remains rented out. Both houses remain in joint ownership.

2015
Husband returns to Dublin house and it becomes his PPR. Wife remains in Cavan house as her PPR.

2023
Couple now divorce and divorce decree stipulates division of properties. Husband to singularly own Dublin property, wife to singularly own Cavan property

Husband wants to sell his Dublin property ( now valued 450k) that was for a period of approx 11 years ( 2004-2015) rented out and was not his PPR.

I understand property disposal post divorce can be CGT exempt but seems like some CGT would be payable in this case?

Is CGT due and if so how to calculate? I understand a Tax Adviser will need to be consulted if CGT is indeed due?

Appreciate any inputs.

 

[AAAContributor]

Is CGT due?

Most likely, yes.

I think this is how it works:

It is 2025 and Husband ("H") owns a property 100% which he wishes to sell.

H acquired 50% of the property in 1993 and the other 50% under the 2023 Court Order which transferred the wife's ("W") share to H with no CGT implications* for W on the disposal to H and so H effectively now owns 100% of the property with the original acquisition price and date.

Is there a capital gain?

Calculation:

Purchase price = €100,000** (there is no value but I will use a round euro figure. If you have the Irish punt purchase price multiply by 1.2697381).

The purchase price can be indexed for capital gains tax purposes.

The 1993/1994 index multiplier was 1.331 (you could use 1.356 if purchased early in 1993 before the tax date of 5 April).

Indexed purchase price = €133,100

Sale price = €450,000

Gain = €316,900

If the property was a principal private residence (PPR) for the ownership period, all of this gain would be relieved for tax purposes.

As it wasn't, calculate the period that it was a PPR in order to calculate what amount of the gain can be relieved from tax.

Ownership period (yrs): 32.5 (rough figures - I assumed 0.5 for 1993 up to end of 2025 inclusive)

PPR period (yrs): 21.5 (I'm taking the figure of 11 years that it was rented out)

Proportion of gain relieved from tax = €209,642

Gain subject to CGT = €107,258

The above should be how things would work in principle, but professional advice is definitely required. There are other nuances to the CGT calculation like accounting for stamp duty (if any), legal fees, estate agent fees, enhancement expenditure, capital gains annual exemption, deemed occupation etc etc, but the Tax Adviser can factor all that in and will be best placed to advise.

The key considerations are:
- what's the acquisition cost,
- what's the gain,
- what proportion of the gain is relieved from tax.

I understand property disposal post divorce can be CGT exempt

Can you expand on the above statement?

*Any transfer of assets under a decree of divorce is treated as being at a "no gain no loss". The spouse acquiring the asset is deemed to have acquired it on the original date of acquisition and for the original cost of the spouse who had first acquired the asset. If such transfers are made prior to a decree of divorce while the couple are living apart then the no gain/no loss treatment will not apply. Any other transfers between divorced spouses are taxable.

** Intermediate values of the property are irrelevant. €300k property value in 2004 nor value of property at the time of the court order transferring the wife's share should not feature in the calculation.