Selling shares and CGT

Riskymove

Hi all,

Hopefully someone can help clarify this for me.

A relation wishes to sell some shares. I understand that CGT is calculated using the profit from the difference between the price when bought and when sold.

However..

The share certificate my relation has is an amalgamation of others following the death of a spouse and changing them to her name only.

How do we go about findning out when the shares were bought or how to value them?

also, as the shares were bought over different times, (e.g. say 3,000 shares bought in 3 different lots of 1,000) and you now sell 1,000....which 1,000 are selected for the calculation?

thanks in advance for any help!

alejandro1977

there are rules re valuation - i.e. First In First Out -

See Chapter 8
2. First In - First Out (or “FIFO” rule)
Where a person holds shares of the same class which have been acquired at different dates, the shares acquired at
the earlier time are deemed to be disposed of first. For example:
2001 bought 1,000 Ordinary €1 shares in X Ltd. for €1 per share
2003 bought 200 Ordinary €1 shares in X Ltd. for €1.50 per share
2005 bought 500 Ordinary €1 shares in X Ltd. for €2 per share
2006 sold 1,500 Ordinary €1 shares in X Ltd. for €3 per share
Sold 1,500 shares for €4,500 in 2006
Allowable cost - (ignoring indexation up to 31/12/2002)
Using “FIFO” Rule:
1,000 @ €1.00 = €1,000
200 @ €1.50 = €300
300 @ €2.00 = €600

http://www.revenue.ie/en/tax/cgt/index.html

http://www.revenue.ie/en/tax/cgt/leaflets/index.html

alejandro1977

just re read the OP

if the shares came her way due to a bequeath (will) then it's not about CGT but Inheritance tax; You need to get professional advice, I'm surprised this hasn't happened. AFAIk the tax if any is based on the value at time of death.

coylemj

alejandro1977 wrote: »

just re read the OP

if the shares came her way due to a bequeath (will) then it's not about CGT but Inheritance tax; You need to get professional advice, I'm surprised this hasn't happened. AFAIk the tax if any is based on the value at time of death.

I did the probate for the estate of an aunt of mine who died a few years ago, part of the process involves submitting the will to the Revenue people, this has to happen before probate is granted so you can be sure they've already collected the tax which by the way is called Capital Acquisition Tax (CAT). You are correct in that the value of the bequest is calculated based on the share price on the day the testator died.

If the legatee subsequently sells the shares, they are only liable for CGT on the appreciation that has happened since they inherited the shares i.e. since the testator died.

katie21

There should be no CAT payable on the inheritance if inherited off a spouse.

coylemj

katie21 wrote: »

There should be no CAT payable on the inheritance if inherited off a spouse.

Didn't spot that, you are correct in that there would be no CAT liability when inheriting from a spouse.

In that case for CGT purposes the shares would be considered to have been bought at market price on the day the spouse died.

Riskymove

Hi all,

can i just ask what the psotion is if the shares were previously in both people's names prior to the death of one?

thanks

coylemj

I think you'll need to take your business over to the taxation forum. I looked at the Revenue website section on CGT but there's nothing about what happens with joint ownership of shares.

The wife is liable for CGT on any appreciation of the shares after the husband died, I can't say with any authority what happens in relation to the tax treatment of capital gains that happened before the husband died but my guess is that the estate of the husband would be liable for CGT on half the gains up to the day he died.

The wife in turn would be liable for the gains on the other half and if she inherited all of the estate the net effect is that she would be liable to pay CGT on all of the shares since they were bought because effectively any tax owed by the estate would come out of her inheritance.

Riskymove

coylemj wrote: »

The wife in turn would be liable for the gains on the other half and if she inherited all of the estate the net effect is that she would be liable to pay CGT on all of the shares since they were bought because effectively any tax owed by the estate would come out of her inheritance.

that would be my assumption alright

thanks for all the comments