Inherited House: CAT plus CGT also?

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flimflam

Registered User
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Hi guys,

I recently, with great surprise, inherited a house from an Uncle and it's since been valued at 300,000 euro.
As I will have to pay Capital Acquisition Tax (CAT) of 33%, I will be due to pay CAT total of 99K (300,000 x 33%).
CAT = 99K.
Since I do not own any other property, I would like to move into this inherited property and so the same property would then become my Principal Residence.

My question is this:
Will I be liable for Capital Gains Tax (CGT) if I was to sell the property at some stage in the future?


CGT is presently 33% so if I was to sell the property at 300K in for example a year will I have to pay CGT of 99K (300,000 x 33%)?

In other words would I end up with a total tax bill of 66%(99 + 99 = 198k)?
(I'm assuming not, if the property was deemed to be my principal residence)

Thanks
FlimFlam
 
Focusing only on the CGT aspect of your question:

CGT is Capital GAINS Tax. If you acquire something today, when it is worth €300k and sell it next year when it is still worth €300k, your gain is NIL. Ergo your tax is Nil.

In general, you pay CGT on the increase in value in the period you own an asset.

(Using your reasoning above, if the property market tanked further, and you sold the house for 150k in a year's time, you'd have to pay €50k of "Gains" tax for the pleasure of selling an asset at a loss of €150k... that'd be mad altogether Ted... ;))
 
Thanks for reply Mandelbrot but even as mad as example given is and and strictly looking at the CGT then as I didn't pay for the asset, anything I would gain from it could be from my immature understanding be liable to CGT.
Sell it in a tanked market for 150K means a net gain of 150k and so to me is a Capital Gain.
 
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Your idea would be obviously more favorable but let's see as it seems to be quite a convoluted area...

Thanks
FlimFlam
 
Capital gains tax is calculated:

Acquisition price ( the price or value when you obtained the property)

less Disposal price ( the price or value when you dispose of the property)

Equals either a profit or a loss or neither profit nor loss.

If there is a profit, it is taxable.

So your acquisition price is the value when you inherit- ie 300,000.

And you therefore have to sell for more than 300000 to make a profit.

Also your CAT calculation is off. You have a threshold of 30,150 ( could be more depending on the date of death of your uncle) free of tax. So CAT is (300,000 less 30,150 ) x 33% ( this rate also depends on date of death) =89,050 roughly.

In relation to both taxes obviously costs , etc can be taken off the calculation but I won't get into that as it might confuse you.
 
As this will be flimflam's PR is she right in assuming there'd be no CGT ?

Also, if flimflam claims that she was living with her uncle for the last few years could she avoid CAT ? Not,of course, that I'd suggest she should make such a claim)
 
No CGT on the sale of a ppr, but in this case OP mentions selling after one year, whether a year is sufficient to make it ones ppr is debatable but in anycase it hardly seems likely that a true present valuation will result in a profit after one year. Especially after deduction of costs, SGE etc.

OP was not living with uncle so it's a moot point.
 
Eh? idle conversation?...no-one's accusing anyone of idle conversation...
The mere mention of "obviously more favorable" alludes to your contention that I wouldn't have to pay an additional tax (CGT) IF I was to sell on the property (after as the given example of one year)....and so would obviously be a more favorable outcome to me financially.
"Convoluted area" is reason why I'm actually asking the question in the first place since having done research, checked Revenue in addition to a host of other financial sites I was still stumped...to a self acknowledged mere protozoa in the tax universe it is quite a 'convoluted area'.
I appreciate your contribution to my query but in advance I did know not of your financial nous...if I had I might even have tempered my response;-)

Thanks again
FlimFlam
 
flimflam said:
Eh? idle conversation?...no-one's accusing anyone of idle conversation...
The mere mention of "obviously more favorable" alludes to your contention that I wouldn't have to pay an additional tax (CGT) IF I was to sell on the property (after as the given example of one year)....and so would obviously be a more favorable outcome to me financially.
"Convoluted area" is reason why I'm actually asking the question in the first place since having done research, checked Revenue in addition to a host of other financial sites I was still stumped...to a self acknowledged mere protozoa in the tax universe it is quite a 'convoluted area'.
I appreciate your contribution to my query but in advance I did know not of your financial nous...if I had I might even have tempered my response;-)

Thanks again
FlimFlam
Click to expand...


It's not the "more favourable" or the "convoluted area" references that bemused me - it was the "your idea" part of your reply!

I'm not sure what part of my post you interpreted as being my "idea" - I was stating FACTS in what I thought was quite a factual and easily verifiable way! But maybe I should have linked to the relevant information...

You say you've searched Revenue - have you browsed this: http://www.revenue.ie/en/tax/cgt/leaflets/cgt1.pdf - specifically Chapter 3 (and in your case as regards the "cost" of the asset you inherit, most specifically Paragraph 2).
 
Vanilla said:
Also your CAT calculation is off. You have a threshold of 30,150 ( could be more depending on the date of death of your uncle) free of tax. So CAT is (300,000 less 30,150 ) x 33% ( this rate also depends on date of death) =89,050 roughly.

In relation to both taxes obviously costs , etc can be taken off the calculation but I won't get into that as it might confuse you.
Click to expand...


Good call Vanilla but no dice....I may have been economical with my facts in original post but that threshold was passed previously when I received previous and accumulated inheritance from 3 different aunt/uncles (I had quite a few) totaling 55k so from my understanding once I go over the threshold then the 300k is hit immediately.
From the posts so far and I am led to believe that I must pay the 33% CAT figure = 99K...that bit is totally understandable.
But the further deduction is that a Capital Gains Tax (CGT) is only applied if in the future the sale of the residence is more than the figure the residence was valued at when I received it (i.e 300K).
My only issue now: is there a stipulation regarding the time one must spend in the residence before selling on?....tis so convoluted;-)

Thanks for explanation!
FlimFlam
 
mandelbrot said:
It's not the "more favourable" or the "convoluted area" references that bemused me - it was the "your idea" part of your reply!

I'm not sure what part of my post you interpreted as being my "idea" - I was stating FACTS in what I thought was quite a factual and easily verifiable way! But maybe I should have linked to the relevant information...

You say you've searched Revenue - have you browsed this: - specifically Chapter 3 (and in your case as regards the "cost" of the asset you inherit, most specifically Paragraph 2).
Click to expand...

Didn't think for a second that introducing "idea" would cause such a stir!
My allusion was to your complete answer and even though I was unaware of the factual basis for your response, I meant no harm in the mention of that singular word 'idea'....honest;-)
Appreciate the Revenue link...
 
Joking aside, I believe the appropriate response when you have two posters actually trying to help you ( who are both professionals in the relevant area) is 'thank you', not the clever retorts above.
 
Vanilla said:
I believe the appropriate response when you have two posters actually trying to help you is 'thank you', not the clever retorts above.
Click to expand...

Especially with your very clear post on CGT. OP with an inheritance of that size you really ought to pay a professional.

(For my own information what is SGE?)
 
Vanilla said:
Joking aside, I believe the appropriate response when you have two posters actually trying to help you ( who are both professionals in the relevant area) is 'thank you', not the clever retorts above.
Click to expand...


I came on here looking for some information and was much appreciative of same when given but in the process now seem to have become embroiled in a side issue. If you care to read any of my missives to date you will see the words 'appreciative' and/or 'thanks' in ALL so I think I have more than responded appropriately in this regard.
I also think I have every right to my reply even as a new user to the site.
And if my reply is interpreted as one thing or another then you need to understand that my intention was at all times to tie up some misunderstanding as opposed to creating yet another side issue.
I do not know your background as distinct from anyone else (how could I? I am, as aforementioned, a new user) but do find your sacrosanct attitude slightly baffling.
I find it all quite petty and unseemly.

Regards
FlimFlam
 
Bronte said:
Especially with your very clear post on CGT. OP with an inheritance of that size you really ought to pay a professional.

(For my own information what is SGE?)
Click to expand...

Sorry Bronte, I meant small gains exemption.
 
If you acquire the property by inheritance, move into it straight away and then sell it after a year, no CGT should arise on any gain that arises.

There's nothing in Section 604 TCA 1997 (the section dealing with principal private residence relief) to suggest otherwise.

As others have advised you, your base cost in such a CGT calculation would be the property's market value at the date that you inherited it (possibly €300k).

It makes sense really - If when you inherited the property you immediately disposed of it for its market value, you'd clearly have no CGT liability as your base cost and sales proceeds would be equal. If you moved into the property straight away, lived in it for a year and then sold it for (say) €100k more, that gain would clearly be attributable to a period when the property was your principal private residence. Logically, it would be perverse to seek to impose CGT.
 
To be pedantic, the gain on selling any property is liable to CGT but you get an allowance for your Principle Private Residence equal to it's gain price so there is no liability on it.

It's a bit like the difference between something being exempt from VAT and being zero-rated.
 
jpd said:
To be pedantic, the gain on selling any property is liable to CGT but you get an allowance for your Principle Private Residence equal to it's gain price so there is no liability on it.

It's a bit like the difference between something being exempt from VAT and being zero-rated.
Click to expand...

Your post is neither helpful nor clever. Pedantism like that gives advisors a bad name. The poster wants to know whether CGT will arise on the sale of a residence that he/she has lived in throughout the period that he/she has owned the property. I very much doubt that he/she cares how precisely the relief operates. But you couldn't let it go, could you?
 
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