Capital Gains Tax (CGT) Issues in Estate Administration and Probate
09 July 2020
As solicitors dealing with probate and estate administration we are often called upon to sell assets during the course of administration. This gives rise to dealing with capital gains tax matters in estates. This note sets out some quick pointers that may be helpful in considering these issues.
- The estate should be registered separately for its own tax number. Use form TR1 (available if you google this). Send the form TR1 to the relevant tax office. Set out on this blog is an example of a completed Form TR1. A full list of the appropriate tax office and email addresses is set out on the back of the TR1. Emailing a scanned version of the form will suffice. CGT returns should generally not be made in the name of the deceased but rather with the use of the new tax number from Revenue. Our experience is that tax numbers tack two to three weeks to be processed, but sometimes the timelines are shorter.
- The date of death of the deceased is the date when the asset is valued for the purposes of CGT. Death is not a CGT event, nor is an assent to a beneficiary. So neither of those events trigger a liability to CGT. Even though an assent to a beneficiary may be a year or more after date of death, the base cost for CGT is always the date of death (even though the asset may have a higher or lower value at the valuation date or the time of assent – these dates are irrelevant for base cost valuations).
- When an estate is selling an asset there is no individual small gains exemption. So the personal allowance of currently €1270 should not form part of one’s calculations. As a result in some cases, it may be worthwhile assenting a property into the names of the beneficiaries before sale so the individual exemptions may be obtained.
- Another advantage of assenting property into the names of beneficiaries is that the beneficiaries may have allowable losses which can be set against the gain if the gain is made by the beneficiaries in an individual capacity.
- Estate expenses are allowable, but these should be proportioned to the value of the assets. So if the property being sold constitutes 30% of the overall value of the estate, then 30% of the estate expenses will be allowed against the gain. This is in addition to normal conveyancing expenses and auctioneer costs which are also allowable.
- It is also worthwhile noting the provisions of s. 573(6) of the Taxes Consolidation Act 1997 which provides that deeds of family arrangement or similar instruments, executed within two years of the date of death (or such longer period as the Revenue may allow) do not constitute a disposal for CGT. Similar provisions apply to powers of appropriate where the will provides such a power.
- A foreign exchange gain may be made where funds are remitted from a foreign jurisdiction to Ireland during the course of administration. So if a STG£100,000 account in the UK was worth €110,000 on death but €115,000 when remitted to Ireland, capital gains is payable on the increase in value.
These are some considerations that should be made when looking at capital gains tax issues in the context of estates
Attached here is a sample of a completed form TR1 which may be of assistance. For more information on capital gains on estates or any other estate related query please contact Colm Kelly solicitor at email@example.com