Inheritance and Capital Gains Tax re calculation of valuation date.

[GrainneOToole]

Hi All,
Myself and my two siblings have inherited the family home in three equal parts from a parent worth circa €800k. One sibling wants to buy us out and we are in agreement. The parent in question died in 2018 and the property at that time would have been worth circa €600k. The probate is in the process of going through and ownership will pass .

My question is:

1. Do we have a cpaital gains tax liability on our share of the increased value from time of death in 2018 until the probate is finished. This amount of this CGT Liability being 33% of (€200k/3)= 22k where 33% is the CGT rate. €200k is the increase in value from 2018 until now and 3 is the number of siblings? This was suggested by an estate agent but I am not sure.

OR

2. Is the valuation of the property based on the actual day probate goes through or the date of death?

From my reading of Tax and Duty Manual Valuation Date – CAT Manual Part 8:
"8.2 Valuation date of an inheritance
In the case of property transferring from a deceased disponer, the valuation date is
typically later than the date of the inheritance (date of death) and in most cases is
the date of the grant of probate (or the date of the grant of administration for an
intestacy). In certain circumstances...."

Thanks for reading and any insights would be very welcome.

G

 

[T McGibney]

The determination of the valuation date in respect of an inherited asset depends generally on the specific circumstances of each case and given the significant tax implications that may result, it can be dangerous to speculate about what the most appropriate valuation date would be in any given case without having full knowledge of the details of the case. In that regard, you together with your siblings might consider getting professional tax advice to ascertain the correct position.

In the meantime, one question that comes to mind is whether there were particular reasons for what appears to be an unusually long delay in having probate completed after the death of your parent in 2018?

 

[GrainneOToole]

Thanks T - I wanted to get advice here first so that I can have a more intelligent discussion with a lawyer/accountant.

No reason for the long delay - it's just there was no real urgency - does that make a difference?

Can you say what circumstances would apply where the valuation date would happen when the assets are in each of our names?

Thanks again.

 

[T McGibney]

Can you say what circumstances would apply where the valuation date would happen when the assets are in each of our names?

In theory I could, but it would be far too onerous a task to undertake on a voluntary basis, especially on a forum like this, as some of the concepts and their practical application are technical and subtle.

 

[GrainneOToole]

In theory I could, but it would be far too onerous a task to undertake on a voluntary basis, especially on a forum like this, as some of the concepts and their practical application are technical and subtle.

Okay thanks. Is there any further reading you could recommend? Appreciate the response btw

 

[T McGibney]

Okay thanks. Is there any further reading you could recommend? Appreciate the response btw

You're very welcome Grainne.

There are textbooks (Capital Acquisitions Tax by Bohan and McCarthy being one) but their content may rather intimidating to the general reader. The only analogy I can think of would be for me to try reading a medical textbook written for doctors.

With regard to Valuation Date (and many other aspects of tax law), there is the added complication that the contents of the Revenue guides including their Tax and Duty Manual are in several respects misleading as they are written from the perspective that Revenue aren't particularly worried if capital taxpayers in particular end up paying bigger tax bills than they necessarily should.

 

[GrainneOToole]

You're very welcome Grainne.

There are textbooks (Capital Acquisitions Tax by Bohan and McCarthy being one) but their content may rather intimidating to the general reader. The only analogy I can think of would be for me to try reading a medical textbook written for doctors.

With regard to Valuation Date (and many other aspects of tax law), there is the added complication that the contents of the Revenue guides including their Tax and Duty Manual are in several respects misleading as they are written from the perspective that Revenue aren't particularly worried if capital taxpayers in particular end up paying bigger tax bills than they necessarily should.

 

[GrainneOToole]

Thanks for the advice and time