Key Post Can a wife's capital losses be set against a husband's gains?

[greentree]

I wonder if anyone could answer this question.

My wife is about to sell her pre marital home and is set to make a capital loss of about 60K.

Now, I have some equities which are sitting on a capital gain of about a similar amount.

Is it possible to offset the loss against the gain for CGT purposes?

We are jointly assessed for tax purposes....

Thanks!

 

[Brendan Burgess]

The gain or loss on a person's principal private residence is not taken into account for CGT purposes.

Losses on investment properties can be set against other capital gains.

If it was her home for 5 years and rented out for 5 years, then she would be able to claim a CGT loss of €30k.

I don't know if a husband can use his wife's losses. I will leave that to someone else.

Brendan

 

[greentree]

Thanks Brendan. Actually, she lived in it for 4 years and rented it for the last 4 years. So, you are probably correct about the 50% of the CGT loss which can be taken into account for CGT purposes.

Anyone know about if I can offset my gains against her losses?!

 

[mandelbrot]

I wonder if anyone could answer this question.

My wife is about to sell her pre marital home and is set to make a capital loss of about 60K.

Now, I have some equities which are sitting on a capital gain of about a similar amount.

Is it possible to offset the loss against the gain for CGT purposes?

We are jointly assessed for tax purposes....

Thanks!

Hi,

This is not something I've encountered before, so I'll defer to anyone with more experience of it, but a quick search throws up the following (from http://www.revenue.ie/en/about/foi/s16/templates/income-tax-capital-gains-tax-corporation-tax/part-44/)

"Capital gains tax on the chargeable gains of a married woman living with her husband is to be assessed and charged on the husband. The total tax charged is not to be different from what it would be if each spouse were to be assessed separately. The expression "living with" is to be interpreted in accordance with Section 1015(2) i.e. a husband and wife will be treated as living with each other unless they are separated by a court Order or Deed of Separation or are in fact separated in such circumstances that the separation is likely to be permanent."

My reading of that would be that unfortunately you can't offset your gain against her loss.

One possibility that occurs to me though, may be for you to transfer your equities to her - I'm not sure exactly how that can be done with quoted shares? But transfers between spouses don't give rise to a CGT disposal, so you won't be liable to a CGT charge. She could then dispose of the shares, realise a gain and utilise her loss from the house sale against this gain.

Considering there is a substantial potential CGT liability / saving here, I think it's definitely worth your while forking out a couple of hundred quid to get professional advice as to the most tax efficient way to proceed...

 

[greentree]

Thanks mandelbrot. I think professional advice is definitley required here.

BTW, Your idea of moving the shares to my wifes name and then disposing of them? Wasn't there some rule brought in a while ago that you can't do something with the specific purpose of lowering your tax liability?

 

[censuspro]

Hi,

This is not something I've encountered before, so I'll defer to anyone with more experience of it, but a quick search throws up the following (from http://www.revenue.ie/en/about/foi/s16/templates/income-tax-capital-gains-tax-corporation-tax/part-44/)

"Capital gains tax on the chargeable gains of a married woman living with her husband is to be assessed and charged on the husband. The total tax charged is not to be different from what it would be if each spouse were to be assessed separately. The expression "living with" is to be interpreted in accordance with Section 1015(2) i.e. a husband and wife will be treated as living with each other unless they are separated by a court Order or Deed of Separation or are in fact separated in such circumstances that the separation is likely to be permanent."

My reading of that would be that unfortunately you can't offset your gain against her loss.

One possibility that occurs to me though, may be for you to transfer your equities to her - I'm not sure exactly how that can be done with quoted shares? But transfers between spouses don't give rise to a CGT disposal, so you won't be liable to a CGT charge. She could then dispose of the shares, realise a gain and utilise her loss from the house sale against this gain.

Considering there is a substantial potential CGT liability / saving here, I think it's definitely worth your while forking out a couple of hundred quid to get professional advice as to the most tax efficient way to proceed...

That revenue extract refers to the tax charge, the utilisation of losses is a separate matter. My understanding is that capital losses can be transferred between spouses provided there is no separate provisions prevent them from doing so e.g. B&B rules or connected party transactions.

 

[mandelbrot]

That revenue extract refers to the tax charge, the utilisation of losses is a separate matter. My understanding is that capital losses can be transferred between spouses provided there is no separate provisions prevent them from doing so e.g. B&B rules or connected party transactions.

Thanks Censuspro,

I just had a quick look at the actual section to see what it says and sure enough: (Section 1028(3) is summarised in more straightforward English here [broken link removed])

Losses
If in a year of assessment one spouse has allowable losses which he/she cannot utilise because of an insufficiency of chargeable gains (from which those allowable losses would be deductible under section 31), the balance of the losses after being set off against that spouse’s gains (if any) can be offset against the other spouse’s gains in the year of assessment. This treatment does not operate for a year of assessment where either spouse makes an application, that this subsection (subsection 3) does not apply, on or before 1 April of the following year. ​

(Scarlet for me, although I did say at the outset I didn't really know and told OP to get proper advice... )