US based inheritance - CAT query/exemption

mrjimb

mrjimb

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I am the beneficiary of a US estate. The disponer, my parent, was entirely US based, a US citizen, US domiciled, and had no connection to Ireland except for myself. I am a dual citizen of US/Ireland and am tax resident in Ireland. I believe I also fall under the US domicile as I appear to satisfy several of the requirements (intent, family connections, final resting place, etc). All of the estate is situated in the US.

I'm an Irish tax resident, therefore on the face of it I should be required to pay CAT on any inheritance I receive over the current threshold. However, the US/Ireland dual tax convention appears to make the inheritance exempt from this (due to the circumstances of the disponer). I've found a couple of articles online regarding this, plus a thread on this forum on a similar topic all which seem to indicate that I do not have to file or pay CAT.

Also, the following comes from the Revenue guide (IT-39) to completing the IT-38 CAT form: "Note: Particular attention is drawn to an exception to the above rules in respect of inheritances taken from U.S. domiciled disponers. Where a disponer dies domiciled in any of the States of the U.S.A., no liability to inheritance tax arises in respect of foreign property."

I have queried revenue directly about this matter (awaiting response) and am also in the process of seeking independent professional tax advice, but I'd be interested to know anyone's thoughts on the matter - it seems simple, but almost like it's too good to be true?
 
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That would seem to imply that there is no tax if you inherit a property which is outside Ireland
 
@mrjimb Do you have any update on this? I am trying to figure what taxes may be implicated for an estate planning client. Clients (married couple) live in U.S. and are U.S. citizens. Client owns real property in Ireland. Client's son (presumptive beneficiary of real property) lives in Ireland and has dual U.S./Irish citizenship.
 
hessclaudia2 said:
. . . real property in Ireland . . .
Click to expand...
The terms of the US/IRL double taxation treaty only apply where the inherited property is "foreign property". If the client's son inherits Irish property from his parents, Capital Acquisitions Tax will apply in the ordinary way.
 
I was in a similar situation two years ago. I called Revenue and the person I spoke to made it clear that if the assets are in the US and the disponer had no connection with Ireland (which would lead to the possibility that the assets arose from activity in Ireland) then no tax is due. At the same time I found an article in the Irish Times which said the same thing. Not only is no tax due you don't even have to file an IT38. It appears that this only applies to inheritances from the US and the UK.
 
The exemption under the IRL/US DTA applies only to inheritance tax, not gift tax. It applies where (a) the person who bequeaths the inheritance is domiciled in the US, and (b) the inheritance consists of "foreign property".

Whether property is foreign property or not depends on the kind of property that it is: So if the deceased leaves you:
  • land or buildings — "foreign property" it it's located outside Ireland
  • physical moveable property (including currency, negotiable instruments, etc) — if it's physically outside Ireland at the date of death
  • debts due to the deceased (including bank deposits) — if deceased was domiciled outside Ireland at the date of death
  • shares and corporate bonds — if the company that issued them is incorporated outside Ireland
  • insurance policies — if deceased was domiciled outside Ireland at the date of death
  • ships, aircraft — if registered outside Ireland
  • goodwill of a business — if business is carried on outside Ireland
  • patents, trademarks, etc — if registered outside Ireland
  • copyrights, licences, etc — if the rights concerned are exercisable outside Ireland.
 
Yes, as others have said above the exemption applies to multiple asset types. We had a similar situation a few years ago. The inheritance consisted of various investments, shares etc and none of it was subject to tax in Ireland.
 
Under the terms of the IRL/US agreement, it would in principle be within the scope of the US federal estate tax. Whether there is any actual tax liability in the US is going to depend on the circumstances of the case and on the details of the US estate tax rules. I know nothing about the latter but presumably, just as it's possible in the right circumstances to have a nil liability for CAT in Ireland (e.g. because all the inheritances are within the recipients' lifetime threshholds) so it would be possible in the right circumstances to have a nil liablity for the federal estate tax in the US.

But the fact that there's a nil liability in a particular case doesn't, of course, mean that there will be a nil liability in another, different case.
 
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