Selling farm following recent death resulting in CAT and CGT

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My father passed away in December 2016 and as an only child, I inherited everything in the will. I have no interest in farming and didn't want to lease the land so I sold it.

The farm was valued by an auctioneer prior to submitting Probate at about 10,000 per acre and the farm sold for about 13,000 per acre.

Working on taxes now, the CAT will be paid based on the 13,000 per acre, since the actual valuation should be used, according to my solicitor. Additionally he is also saying there's CGT for the 3,000 per acre (13,000-10,000) since the valuation is based on date of death.

Effectively for part of the land I could end up paying 66% tax (33% CAT, 33% CGT). It's hard to argue that land valuation has gone up 30% in 6 months, but has anyone dealt with this scenario and if so what did you have to do?
 
Perhaps you fell into the trap where the land was valued on the low side on inheritance, to minimise your inheritance taxes. This is penny wise and pound foolish especially if you intend to sell within the prescribed time.

Anyway, you don't have 66% tax to pay.

Since Oct 2016, as child, you have a tax free threshold of €310K. How large is the farm? Multiply the acreage by €10K and by €3K.

You may be entitled to Agricultural Relief and if so, the value of the farm is reduced by 90%, so it is valued at 10% of the value. If the value of the entire farm is under €3.1m, and you qualify for this relief, then there is no CAT payable.

There will be CGT payable however. That will be based on €3K per acre above the €10K. As far as I know,there is no relief available on that, save the standard CGT relief of around €1270. So if the farm was 100 acres, you have a CGT liability on €300K.

If you sell the land within 6 years of the inheritance, you will lose the Agricultural Relief.

So if the farm was 100 acres, valued at €10K per acre = €1m. You have threshold of €310K, so tax payable on €690K @ 33% = €227K. We must then add the CGT, which is €300K - €1270 = €298730 x 33% = €98581, giving a total tax liability of €325581.

Did not the solicitor handling the estate mention the tax liability issues in the event of a sale? There were options, such as leasing which would be tax free if you are 50+
 
Thanks for input. I do not qualify for Agricultural Relief. Not a farmer. This really comes down to the valuation dates for CAT and CGT.

Any ways to pay CAT based on the valuation provided by the auctioneer (lower market price at date of death) versus the valuation at the Date of Probate (sale price)?

Or alternatively any ways to change the market value from the auctioneer to get it closer to valuation in the sale price? Has anyone filed a Corrective Affidavit (CA26) for a significant/material change in valuation?
 
This sounds like a nonsense.

There can't be both CGT and CAT on the incremental €3,000.

You either pay CAT on the €10,000 (ignoring your threshold) and CGT on the €3,000, or CAT on the €13,000 and no CGT.
 
Gordon Gekko said:
This sounds like a nonsense.

There can't be both CGT and CAT on the incremental €3,000.

You either pay CAT on the €10,000 (ignoring your threshold) and CGT on the €3,000, or CAT on the €13,000 and no CGT.
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Not sure that it's nonsense. What may be happening is that the land is being sold by the estate, so the estate is liable to CGT on the increase in value between the value stated on the inland revenue affidavit and the proceeds.

The OP will then receive the net proceeds of the sale and will be liable to CAT on the amount in excess of their threshold.
 
Are you sure you do not qualify as 'farmer'? Perhaps you need to talk to a tax advisor.
 
This is a common problem when inheriting any assets that you then propose to sell on. I was caught be the information given to me when I was asked to value a house which was to be sold after. If I was informed of the consequences I would have had the probate value higher but alas when the time came to sell the house a capital gain was on it and so the mafia taxman got a piece.
 
john luc said:
This is a common problem when inheriting any assets that you then propose to sell on. I was caught be the information given to me when I was asked to value a house which was to be sold after. If I was informed of the consequences I would have had the probate value higher but alas when the time came to sell the house a capital gain was on it and so the mafia taxman got a piece.
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You mean in your naivety you did things honestly and paid the correct amount of tax...? :confused:
 
No they are not. We all must be honest in our dealings with tax man.

There is a difference between tax avoidance and tax evasion.
 
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