Capital Gains Tax On The Sale Of A Deceased Persons Property

J

judge

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This is a bit long so please bear with me. I thought I had this worked out after many dead ends and wrong information but an accountant has put a couple of spanners in the works. Any opinions etc. greatly appreciated as the deadline for submitting the payment is approaching.

My father in law passed away and it has come to the point where we have sold his house as part of administering the estate. The house has risen in value by €60k between the data of death and the date of the sale of the house. From what I understand CGT is to be paid on the difference between the value at these 2 dates (€60 x 20%). This seems to be supported by this quote from the revenue website
[broken link removed]
If the personal representative sells any property during the administration period, there may be a liability to Capital Gains Tax - but only to the extent that the value of the property in question has increased between the date of death and the date of sale.

  • Who makes the CGT return? Each of the beneficiaries or the administrator?
If each beneficiary makes their own return how should their liability be documented?
There are 4 children so it it (60k x 20%)/4
Will a document from the administrator with supporting documentation suffice?
  • Does the distribution of this cover the administrator so far as the correct execution of their duties?
  • Are there any Capital Acquisitions Tax issues here?
  • Is there anything else that I should be aware of.
  • Should this be handed off to an accountantto make things easier?
  • Are there any issues if someone lives in the uk
All help appreciated.
Judge
 
I think you should pass it to an accountant in any case because it is always worthwhile obtaining professional advice.

However you should bear in mind that if it is a relatively short time between death and sale and if the beneficiaries are not already at or exceeding their CAT thresholds, you might be able to do a corrective affadavit to the Revenue giving a correct figure/ value for the house and thereby no CGT. However if there really was a 60k gain in value ( and the original figure given was correct) then no point, similarly if the beneficiaries are at or over the threshold for CAT, no point since what they save in CGT they pay in CAT.
 
Nobody would really have had any other CGT liabilities in the relvant year and the estate went through probate which took about 18 months from the date of death meaning the 60k is about correct. My real concern here is that the administrator fully completes their duties and knows that there is nothing which can come back to bite them. There were no real assets apart from the house so there is really nothing else beyond the CGT which needs addressing.

Sorry misread the CAT as CGT. I am not sure why any CAT issues would be an issues here; also in all of the reading I have done I dont remember coming accross CAT issues.

Judge
 
Really, the house gained 60k in value in a year and a half?

CGT is an income tax- so really each beneficiary should deal with their own liability. However in teh case of a beneficiary who is non resident, the vendors solicitor is obliged to hold on to the proceeds until a return is done and a clearance cert obtained.

To try to be a little clearer:

Example; man dies leaving house which is valued for estate purposes at 400,000.00. He has four children who each inherit a quarter share. The house subsequently sells for 600,000.00 6 months later. Here is a gain of 200000. But hey- was the original valuation correct- how could a house rise in value this much in 6 months. We go back to teh valuer and he says yes, he undervalued it. The executor submits a corrective affadavit this time correctly valuing the house at 600000.00. No CGT. Also because the children are only each inheriting 150000, they are not liable to CAT. Now if they had previous inheritances which meant that they were exceeding their CAT threshold anyway then there would be no point in the corrective affadavit in a way, because CGt and CAT are both 20%, although it would be a more accurate representation of the reality, there would be no tax saving. Does that make sense?
 
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If the house was sold in the course of administration of the estate before vesting in the beneficiaries then the CGT liability is to the estate and not to the beneficiaries. The executor/administrator makes the return and no small gains allowance can be deducted although the costs of the probate (or proportion thereof) as well as the costs of sale can be deducted. This may go some way to reducing the liability. The net amount is then included in the administration accounts and divided among the beneficiaries according the terms of the will/intestacy. CAT returns are then made if appropriate based on the actual amount received by each beneficiary. I would suggest that you get an accountant to do the returns for you. It would also be wise to hold back a portion of the estate to cover any assessment that revenue might make after you have filed the return. It can take the CGT section up to 18 months to deal with returns and issue a clearance. It would not be standard practise to hold all the funds pending clearance but it would be normal to hold something, particularly given that the deceased persons income tax is usually gone through by revenue before they issue the clearance. Its a complex issue, get professional advice.

You mention a UK based beneficiary, they should obtain tax advice in the UK as they may have an inheritiance tax liability there even if they have none here.
 
We have passed this onto an accountant for help. Thanks for the feedback guys.
 
If the house was sold in the course of administration of the estate before vesting in the beneficiaries then the CGT liability is to the estate and not to the beneficiaries. The executor/administrator makes the return and no small gains allowance can be deducted
Click to expand...

That's interesting. I would have thought as beneficial owners they would be entitled to deduct the SGE. Do you have a reference for this?
 
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