Wife inheriting shares with capital gains

You mention the courts. I am not at all suggesting anything illegal is happening here or indeed that there is anything reprehensible about shifting investment income for the sole purpose of optimising the tax position, though it does seem unfair that pension assets cannot be so managed.
I also suppose that I am not referring to the original intent which was to make the taxation of married couples Dev friendly. But it was so controversial that a bogus rationale was developed that it was to "encourage participation (of wives) in the workforce. Giving couples living off investment income was clearly not in the "spirit" (your terminology) of this rationale.
Your invoking of the "spirit" almost suggests that taxpayers should take a moral attitude to their tax affairs irrespective of the letter of the regime. I don't agree with you, so maybe we should agree to disagree.
 
Hi Duke

See attached.

It seems that full transferability was introduced in 1980 - i.e. a married man got twice the allowances and bands than a single person got. Before 1980 two single people living together paid less tax than a married couple.

The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. Attorney General (1980). This decision was based on Article 41.3.1 of the Constitution where the State pledges to protect the institution of marriage. The decision held that it was contrary to the Constitution for a married couple, both of whom are working, to pay more tax than two single people living together and having the same income.

Individualisation was introduced in 2000.
 

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Brendan Burgess said:
Hi Duke

See attached.

In the years before individualisation was introduced, a married man got twice the allowances and bands than a single person got.
Click to expand...
Thanks Boss. As I said my memory is a bit hazy on the details. But I humbly concede that a lot of what I recalled was erroneous, but not the main point of my raising the issue.
The following point has improved my mature reflection.
Tim Callan said:
This declared the previous (joint taxation) system to be discriminatory against two-earner couples, and unconstitutional.
Click to expand...
I remembered this "previous" system. It is now clear that the original reaction to the Dev objection was to allow married couples with only one earner double the bands etc. I seem to recall myself benefiting from this windfall. It was very short lived and, possibly genuinely with the intention of increasing female participation in the workforce though I think more to rebalance the tax system, Charlie came up with individualisation. By this married couples could opt to either be a joint entity with somewhere between the 100% and 200% of the singe bands etc. or to opt for individualisation. Clever.
But my main point is that it was an unintended consequence that married couples living off investment income could continue to enjoy the "windfall" of double the singe bands.
 
Brendan Burgess said:
Why do you think that was unintended?
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I think we are playing with words here. Of course they knew this was a consequence. But clearly if the motivation was to increase female participation in the workforce, allowing investment income couples adjust their ownership of that income so as to retain the "windfall" of having double the single bands was if anything a disincentive for the females in that couple to go out to work. So let it call it an undesirable consequence.
But we are talking about a small minority and correcting the anomaly would have had much more significant implications.
I think my earlier analysis was essentially correct but I forgot that there was a very short interim period when married one income couples had a very favourable tax treatment.
 
Brendan Burgess said:
I would have thought that the original objective was a bit more fairness but I don't remember back that far.
Click to expand...
Whatever. I don't think fairness would dictate that an investment income couple could rearrange the ownership of their assets to attain a tax situation which was more favourable than say a pensioned couple had, would be classified as "fair". After all they didn't have that facility in the earlier long standing arrangement which was deemed eminently fair. It taxed married couples having regard to the economics of a couple sharing, but that was found to be unconstitutional.
 
Brendan Burgess said:
He was asking about two people in good health who sell their shares to each other and then sell them on the open market. I have fully explained the ramifications of doing this and no one disagrees with what I have said.

Brendan
Click to expand...

Yikes - sorry Brendan - I completely misread who said what! My bad!! [......even still, not even close to the biggest boo-boo on this thread!]
 
I still don’t see your point. Prior to McCreevy’s changes, it didn’t matter who held the investment assets and subsequently they possibly needed to be split to optimise things. But spouses can move assets around on a tax neutral basis. The pension is a red herring because it’s the structure that is incapable of being transferred.
 
Assets being transferred into a dying spouses sole name to rebase for CGT is standard tax advice. Although usually in practice what I see more is people thinking of doing transfers into joint names after being diagnosed with a terminal illness to avoid having to take out probate but then being advised not to do it so that the spouse inheriting can sell or transfer on to family members without CGT. Also in relation to agri relief it's extremely common for an individual to transfer all assets into the sole name of a spouse to qualify for agri relief, either in advance of a transfer or in advance of a valuation date. If you watched tv last night and saw the increase in agricultural land prices...that is partly because of the use of agri relief to pass on wealth which is a fairly common wealth planning measure.
 
We know why pensioners do not have the same flexibility as their counterparts whose assets are outside a pension structure. Someone mentioned fairness. If the ability of investment income couples to rearrange the ownership of their assets purely for tax optimisation was deemed to be fair then surely it should have been allowed that pensioners could, in their tax returns, allocate their pension income in a similar optimal fashion. In fact if this was thought desirable the facility should also have been allowed to investment income couples, without having to go to the bother of actually transferring the assets.
So IMHO the facility to tax optimise ownership of investment income was an unfortunate and unwanted bi-product of the final result of the Murphy ruling. Not sure what "spirit" means but I ask does going out of your way to avail of an "unfortunate and unwanted" tax break breach that spirit?
 
Investment income flows from ownership of an asset. I can’t allocate a portion of my salary or my pension income to my wife because she can’t become the owner of those. They’re separate and distinct things. Investment income can be reallocated because the underlying assets (e.g. shares or a building) can be transferred relatively easily. It’s a red herring and a non-issue.
 
I am talking about a tax form. Married couples have the choice in their tax form of saying their income is joint or is individual, though the Revenue will have pre-populated it to give the optimal results.
Prior to Murphy married couples had no choice - their income was deemed jointly owned no matter who actually earned or owned it. Look it is a little "loophole" which would have been removed if it didn't involve digging up the whole patio. No need to feel guilty for recommending it even if it is against the spirit.
I think we have said enuff on this but you are welcome to the last word.
 
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