Inheritance Tax & Falling House values

E

EOC74

Registered User
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Hi,
I have a query about how/when and how much tax needs to be paid on an inherited property, in the current market.

My understanding is that if I inherit a property from my sister which I don't live in, I have to get it valued. I then have to pay the tax based on that value within a month or so? However, with the current state of the property market, I might be unable to sell the house in that time and when I do eventually sell it, I probably will not get the valuation price. Therefore my questions are:

1. Am I liable for the tax based on the valuation price even if the house is sold for 30% less?

2. If I cannot sell the house for a year, when is the tax due?

Many Thanks.
 
This might help:

"The valuation date is the date on which the market value of the property comprising the gift/inheritance is established.
In the case of a Gift, the Valuation Date is normally the date of the gift.
In the case of an Inheritance, the Valuation Date is normally the earliest of the following dates:
  • the date the inheritance can be set aside for or given to the beneficiary;
  • the date it is actually retained for the benefit of the beneficiary;
  • the date it is transferred or paid over to the beneficiary. "
 
I think the tax is payable 4 months after the valuation date. The problem is ascertaining what the actual value of a property is in the current market. I'm sure Revenue has some info on that.

Sprite
 
WaterSprite said:
I think the tax is payable 4 months after the valuation date. The problem is ascertaining what the actual value of a property is in the current market. I'm sure Revenue has some info on that.

Sprite
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I'm very interested in this - I am not at all sure that Revenue have anything on it at all! I have two separate current cases where a sibling has died and the estate ( including a house) is to be divided between all - in each case the people want to sell the property. That is how they will get their share. I don't think the properties will sell - at all and none of the family want to buy.

However, Revenue take the view that the valuation date is the date when the property can be vested in them i.e. when Probate issues.

I need a date of death value for Probate purposes but I am not at all sure that any such valuation will be accurate. What I am tempted to do is to put the properties on the market now - in the hope ( forlorn perhaps?) that I get offers and make any contracts subject to the Grant. And use the sale price as the date of death value.

My difficulty is that if the properties do not sell that I will have to, at some stage, nominate a value ( using an EA) for probate purposes and once probate issues the beneficiaries will have to pay their CAT after 4 months whether or not the property sells.

The difficulty will be that either (a) the property never sells or drops in value or (b) the property does sell but at a price greater than the date of death value - leading to a CGT liability.

I suppose its swings and roundabouts really!

Any one have any views?

mf
 
In a similar situation except in receipt of an inheritance. I've no inclination to pay over anything without having the money to do so! So I would like the property to be sold as part of the division of the estate. Is it possible to delay probate until the house has sold?
 
I suspect that a Grant can be delayed/held off for a few months but after that..........I think Revenue take the view that, in the absence of any major difficulties, Grants should be extracted reasonably quickly and that penalties/interest may be applied if CAT is not made within a ( subjective) reasonable period.

mf
 
There is something about having it based on sale price of the house but this needs to be applied for immediatley. Contact Revenue on 018655000 and ask for CAT section, they will steer you in the right direction.
 
The revenue has a vested interest so i am loathe to take their advice. The bottom line is i cant see how they expect you to pay on a valuation that is pie in the sky. Presumably the idea with the valuation date was to avoid people selling property for buttons to avoid tax. Thats clearly not the case here. Has anybody else run into this?
 
advisor said:
There is something about having it based on sale price of the house but this needs to be applied for immediatley. Contact Revenue on 018655000 and ask for CAT section, they will steer you in the right direction.
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This section are extremely helpful, the only reason solicitors don't advise you if this option is that hey get to wrap things up quicker, get paid and move on to the next victim. Solicitors charge a fortune for what can be quite easily done yourself. I know a lot of people who have dealt with this section (they are based in CRIO office in O'Connell street) and have found them v. helpful and suprisingly have saved quite a lot of money!!
 
MF1 how can something not sell, surely if the price is low enough anything will sell. As a solicitor by contacting someone in revenue they should be able to tell you what to do, if not how about the law society or do solicitors by any chance have an equivelent to AAM where they can ask each other questions, maybe a tax advisor specialising in this area but then that may greatly increase costs. Tricky situation for sure. If you get nowhere with all this just give the clients the options tax wise, pay CAT now based on maybe too high a valution (if it sells for less), or pay CAT on a lower valuation leaving the way open for CGT when sold. There is no way anyone can judge the way property prices will go. I can for sure see that it's not fair to pay CAT on a certain value that may not be the sale price.
 
You can apply to Revenue for a proceeds of sale letter, where CAT is due on sale proceeds instead of valuation price. Contact Revenue directly for full details as this is a specialised area.
 
advisor said:
You can apply to Revenue for a proceeds of sale letter, where CAT is due on sale proceeds instead of valuation price. Contact Revenue directly for full details as this is a specialised area.
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I don't think we are talking about the same thing. The proceeds of sale letter, as I understand it, only means that CAT attaches to that rather than to the property. I'm concerned about arriving at a CAT date of death valuation.

mf
 
I am in same position, tax is already due, and am being charged interest daily, on a valuation made at start of year, have been told that the property may still not get any offers at E 65,000 less, and yet Revenue have state that Inheritance tax must be paid on the value of the property at the date of valuation for probate. This is obviously not right but there doesn't seem to be much info out there, this has never happened before, it's the first time in recent history that, property prices have plummeted like this. Please can anyone help. Can it be right that you owe tax on something you never had or will have. How would I find out who has expertise in this area that I could consult, if I ever sell house, would be happy to pay tax but only on the actual real value and not on some totally unreal figure from a year ago.
 
If Joe Soap inherited a house from his aunt Mrs. Curran. He has the house valued at 100,000 at the date of a Grant of Probate. He would have to pay tax of approx €9,000 on his inheritance. Joe then decides to sell his house but only gets €80,000 for it. He doesn't pay any CGT on the sale as he has made a loss. Joe is still up €71,000 so i wouldn't have any sympathy for him. He has lost absolutely nothing.
 
That doesn't make any sense, if the value of the house is 100,000 at probate but only really worth 80,000 ,then you should only pay tax on the actual REAL value, you cannot be expected to pay tax on money you never had or will have, otherwise the whole taxation system doesn't make any sense. If you were taxed in your pay packet on money that you never received or would receive do you think that would be fine too?
 
He doesn't pay any CGT on the sale as he has made a loss.
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And he would have a capital loss to carry forward to put against any future capital gain on any other asset he may have (unfortunatly useless if you don't have another asset!!

That doesn't make any sense, if the value of the house is 100,000 at probate but only really worth 80,000 ,then you should only pay tax on the actual REAL value
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I guess the other way to look at it would be if the probate value was €100,000 and the house sold for €120,000 you'd be happy enough....swings and roundabouts I guess!!
 
That doesn't make any sense, if the value of the house is 100,000 at probate but only really worth 80,000 ,then you should only pay tax on the actual REAL value,
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You are taxed on the value as of a particular date. You may never sell it. It is the fairest way of doing it.

you cannot be expected to pay tax on money you never had or will have, otherwise the whole taxation system doesn't make any sense.
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Your not being taxed on money that you never had you are being taxed on land that you have got. It would be no different if you got shares that were valued high and then dropped before you sold them. Just hard luck.

If you were taxed in your pay packet on money that you never received or would receive do you think that would be fine too?
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Eh no!
 
jazzhead said:
How would I find out who has expertise in this area that I could consult,
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Any decent tax consultant or accountant should be able to advise. Ask friends & family for recommendations if necessary. And you would be wise imho to get this advice urgently.
 
ubiquitous said:
Any decent tax consultant or accountant should be able to advise. Ask friends & family for recommendations if necessary. And you would be wise imho to get this advice urgently.
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Yeah you're right will get some advice, Thanks a million !
 
Similar situation, but worse

My mother and her 2 sisters inherited my grandmothers house back in 2008. It was then valued at 3mio Euro. To this day the house has not sold and the price has dropped. Currently the house would not sell for more than 800'000.-.

My mother has not paid any innheritance tax and is not able to do so before the house sells. One of her sisters has paid her tax.

I however wonder if there will be any money left if the house would sell now. What is the best thing to do in such a situation?
 
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