CGT on family home after court ordered sale

Mary and John divorce in 2020 and as part of the divorce, a court order is made to sell the house in 5 years (2025)

Mary will live in the house until the house is sold. John purchases a new home for himself in 2023.

When the house is sold in 5 years from date of divorce (2025), is John liable for CGT, while Mary is not?

Getting mixed advice re the PPR/CGT exemption, including from Revenue and would welcome any advice re the CGT.

And, yes i'm fully aware Mary will drag John through the courts to delay the sale.

Assuming John won't live in the house from 2020 ownwards, it's not his PPR during that period. He gets the usual 12 months' grace period that anyone gets, but when the house is sold in 2025 it will be treated as not having been John's PPR for 4 years of the period of ownership. The position might be different if John doesn't entirely move out — e.g. if the children stay in the house, while John and Mary move in and out, to give effect to shared custody without requiring the children to keep moving.

(If John did succeed in getting the house treated as his PPR during 2020-25, then the consequence would be that his new home would not be his PPR in 2023-25. You can't have more than one PPR at any time.)

Aren't there circumstances in which PPR style CGT relief can apply to a non PPR (without affecting such relief on one's actual PPR) when the property is provided for dependent family members? I.e. there are circumstances in which, for family/dependant reasons, one can avail of PPR style full CGT relief on more than one property? I'm struggling to find the actual TCA references at the moment but I previously received tax advice along those lines in relation to my own divorce.

I think you are referring to section 604(11) TCA 1997.

That subsection extends the PPR relief to property occupied rent-free by a "dependent relative" as defined, which is "a relative of the individual, or of the wife or husband of the individual, who is incapacitated by old age or infirmity from maintaining himself or herself", or a widowed parent of the owner or the owner's spouse... No mention of estranged spouses, or of children.

This thread exposes a hidden but highly unjust and ridiculous anomaly in the Capital Gains Tax code, that I have seen hurting people in the aftermath of marriage breakdown.

As the law stands, if a spouse or partner leaves the family home to escape physical or emotional violence or abuse, they are exposing themselves to a potential future capital gains tax liability on the future sale of that home.

If they wish to avoid this, they can move back in, and risk a resumption of the violence or abuse.

This is unjustifiable.

You have, if I recall, up to three years after divorce for the parties to transfer assets to one another on a no-gain, no-loss basis, just as if they were still married. So if there's a "clean break" financial settlement in which all the property transfers and other settlements are made relatively soon after the divorce, there's no tax penalty.

The problem arises where a clean break settlement isn't appropriate, and this is almost invariably because there are dependent children of the marriage whose interests would not be served by it. I agree with Tom that there ought to be some CGT relief in that circumstance.

Interesting anomaly ok

It would be fair if he got ppr relief for as long as he does not own another home.

Good one for a pre-Budget submission.

Has it been discussed in the various reviews of the tax system?

Brendan Burgess said:

Has it been discussed in the various reviews of the tax system?

Click to expand...

I've never once heard it mentioned.

It never occurred to me until I had a client negatively affected by it, in generally dreadful circumstances.

I've since had others in the same boat.

T McGibney said:

This thread exposes a hidden but highly unjust and ridiculous anomaly in the Capital Gains Tax code, that I have seen hurting people in the aftermath of marriage breakdown.

As the law stands, if a spouse or partner leaves the family home to escape physical or emotional violence or abuse, they are exposing themselves to a potential future capital gains tax liability on the future sale of that home.

If they wish to avoid this, they can move back in, and risk a resumption of the violence or abuse.

This is unjustifiable.

Click to expand...

This is exactly the reason why John left his family home, never to return.

Surely this exact scenario comes up regularly enough? Historically, the mother and kids are left in the home until 18 yrs old, or finishes college etc. (thankfully somes judges now see how unfair this was/is). What happened with a 50/50 sales in this case?

John has been advised to argue his case with revenue that there is a court ordered sale (the house is to be sold, however a "hold" on the sale for 5 years). It may have been 7 years not five.

I don't know whether this is something that the Revenue could grant by way of extra-statutory concession and, if so, whether there is a process for negotiating and establishing such a concession.

If not, I think it requires amending legislation, and some relevant stakeholder group should be including it in pre-budget or other submissions made to the Dept of Finance.