Using a company structure to settle CAT liabilities with an investment property

[Brendan Burgess]

The Irish Times had an article on CAT and property yesterday.

Death and taxes: what it costs to inherit the family home

It included the following


One way to deal with the transfer of investment properties would be to house them in a company structure, as the company cash could then potentially be used to settle CAT charges.

It gave no further details. I had not heard the suggestion before and I can't see how a company structure might help. I would think that it would make matters worse.

Brendan

 

[Gordon Gekko]

Let’s have a think about that:

- The company pays 40% tax on the rent (25% corporation tax plus close company surcharge).

- The shareholder dies, and someone inherits the shares in the company. He/she pays CAT based on the value of the shares.

- The properties are still trapped in the corporate and the corporate will still pay 33% CGT on the properties if they’re sold.

- There can be something of an angle if the company is an offshore one, but that’s not what’s been suggested in the article.

I must admit, I read the article yesterday and thought it was very poor.