Key Post Capital Gains Tax & Estates & Capital Acquisitions Tax

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Joe_90

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This has come up in a few threads and I will try to give my take on it.

Death, as a general rule does not give rise to a Capital Gains Tax Event. The Executor/Administrator acquire the assets at the market value at the date of death.

In general the executor will apply for a grant of probate and then will transfer the assets to the beneficiaries again this transfer does not give rise to a Capital Gains Tax Event. So in most cases the issue of CGT in Estates does not arise. The beneficiary will have in the future a CGT liability when they sell the asset.

There can be cases where the Executor sells an asset either on foot of an instruction in a will or as the beneficiaries would rather receive cash and not the asset.

The disposal by an executor of an asset during the period of administration will result in the liability for CGT falling on the estate. The proceeds less the value on the date of death will be assessed on the estate.

There is an important point to be understood about the sale by the executor, there may an occasion within the period of the administration that an asset is appropriated to the beneficiary, if this is the case then the CGT is assessed on the beneficiary and not the estate.

I'm not a solicitor so if any of the solicitors have experience of this apportionment of assets to beneficiaries please feel free to let me know about the practicalities of not having transferred ownership by apportioning it to the beneficiary.

There is also a bit of a conflict where the executor sells the property , the beneficiary may have paid CAT based on the value on the date of the grant of probate and then having paid CAT could have the value reduced if the CGT liability is significant, where there has not been an appropriated during the period of administration.

https://www.revenue.ie/en/tax-profe...ains-tax-corporation-tax/part-19/19-03-09.pdf
 
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Hi Joe

Thanks for that.

I have come across some cases recently and they must be a very common occurrence.

A dies on 1 January 2016 and leaves the estate to be divided between B,C&D.

The main asset is A's family home which was worth €100,000 on 1 January 2016.

Probate is granted on 1 September 2016.

The Executor sells the house on 1 March 2017 for €120,000 net of all costs.

The Executor is liable to CGT on the €20,000 increase in value between the date of death and the proceeds of sale.

Is it as simple as that?

I have heard a solicitor and an accountant, both of whom, I have respect for, flatly denying that there was any CGT liability attaching to the Executor.

And I heard a complication that if one of the beneficiaries is living in the house at the date of death, there is no CGT liability.

I appreciate that the Executor may choose to convey the house to the beneficiaries, but let's deal with that scenario separately.

Brendan
 
Joe_90 said:
There is an important point to be understood about the sale by the executor, there may an occasion within the period of the administration that an asset is apportioned to the beneficiary, if this is the case then the CGT is assessed on the beneficiary and not the estate.
Click to expand...

I have no idea what this means. If it's a rare occurrence, could we delete it from the original post so as not to confuse people? And maybe deal with it later by way of FAQ.

Brendan
 
Brendan,

If in your example there was this apportionment to the beneficiaries then the CGT would fall on the beneficiaries so may result in no liability for the estate.
 
The word is appropriated, I've changed it. I don't know if it is an action of allocating an asset to a beneficiary or more. Hopefully one of the solicitors will have a view.
 
I am glad that I am not the only one confused by it.

If this "appropriation" is a rare event e.g. involving a trust, then it should be omitted from the guide as it's very confusing.

Brendan
 
I am just following up on this interesting thread about the challenges of paying CGT as an executor!

My sister and I are joint executors and sole beneficiaries of my uncle's late estate - all he left in his will was his house which has now been sold through the estate in the same tax year as probate was granted. We are both non residents but he was an Irish resident. The selling price was about 25,000 euro above the CAT valuation - or 19,000 net of selling fees/solicitors costs etc. So its slightly different as we are both executors and beneficiaries.

Based on advice here we should technically apply for a separate PPS number for the estate via completing a TR1 form and returning it to the tax office - albeit do we complete the resident or non resident form (as my uncle was a resident but we aren't).



Could we not simply however submit our own separate CGT1 returns via Myaccount/ROS for our halves of the CGT bill to take advantage of the 1,270 tax free allowance - as this is quicker and simpler and saves us over 800 euro. The total estimated CGT due is just over 6,000 euro before any tax free allowance - so a relatively small sum for the revenue. Our solicitor is on the slow side and this would mean we could sort this out quickly and meet the 31 October filing and 15 December payment deadline.

We have no other income or tax dealings in Ireland.

Any thoughts would be welcome. We just really want it sorted so we can move on!
 
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