Joint ownership and tax due on death

Joe1919

My sister and I jointly inherited an old house from our father in 2005. The house was valued at €140,000 at that time but its valued at €70,000 today. In 2012, our uncle died, leaving my sister an old house of value €45,000 and she paid some inheritance tax on this. I receive a cash inheritance from the same uncle of €15,000.

I had a discussion lately with my sister and we were wondering about the position on the death of either one of us. Now, I assume the surviving joint tenant automatically gets full possession but are taxes due? I was estimating that if I died, she would have to pay a full 33% tax on half the current value (which would come to almost €12,000) because her inheritance from her uncle had used up her threshold.

I amount that I would pay on her death would be lesser I presume.
Am I right about this?

seamus

Yeah, pretty much. There are some exemptions - e.g. if your sister lived in the house for a period of 3 years at the time of your death, her inheritance of your half would be exempt from CAT.

You could also do some twiddling, for example, the sale of a PPR is exempt from CAT. If one of you lived in the property for the minimum amount of time and then sold your half to the other non-resident, there would be no CAT payable on that sale, and no effect on your gift thresholds.

I think it would be worth speaking with an accountant to see what the best way to proceed is.

Pat Mustard

Dwellinghouse relief was significantly restricted in 2007.

This is what the Revenue boys have to say:

Section 86 of the Capital Acquisitions Tax Consolidation Act 2003 provides that gifts or inheritances of a dwelling- house taken on or after 1 December 1999 will be exempt from capital acquisitions tax provided the following conditions are complied with -

1. The recipient must have occupied the dwelling- house continuously as his/her only/main residence for a period of 3 years immediately prior to the date of the gift/inheritance. Where the dwelling- house has directly/indirectly replaced other property owned by the disponer, this condition may be satisfied where the recipient has continuously occupied both properties as his/her only/main residence for a total period of 3 out of the 4 years immediately prior to the date of the gift/inheritance.
2. The recipient must not, at the date of the gift/inheritance, be beneficially entitled to any other dwelling- house or to any interest in any other dwelling- house. The Revenue's view is that a dwelling-house means a building or part of a building being used or which is suitable for use as a dwelling.
3. Gifts taken on or after 20 February 2007: Any period during which a donee occupies a house that was during that period the disponer's only or main residence will be disregarded as a period of occupation in that house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the donee for that period. Old age refers to a person aged 65 or over.
4. Gifts taken on or after 20 February 2007: The house must be owned by the disponer during the 3 year period prior to the gift and, where the gifted house has replaced another property, each house must be owned by the disponer for the relevant part of the 3 year period that it was occupied by the beneficiary.
5. The recipient must continue, except where such recipient was aged 55 years or more at the date of the gift or inheritance or has died, to occupy that dwelling- house as his/her only/main residence for a period of 6 years commencing on the date of the gift/inheritance. Where the dwelling- house is directly/indirectly replaced by other property, this condition may be satisfied where the recipient continuously occupied both properties as his/her only/main residence for a total period of 6 out of 7 years commencing on the date of the gift/inheritance. A recipient absent during any time through working abroad is considered to remain in continuous occupation of that dwelling house.

The exemption will not be withdrawn where a breach of the condition referred to at e) above is as a result of the recipient requiring long term medical care in a hospital, nursing home or convalescent home or as a result of a condition being imposed by an employer on a recipient to reside elsewhere.

Victor

Joe1919 wrote: »

I had a discussion lately with my sister and we were wondering about the position on the death of either one of us. Now, I assume the surviving joint tenant automatically gets full possession but are taxes due? I was estimating that if I died, she would have to pay a full 33% tax on half the current value (which would come to almost €12,000) because her inheritance from her uncle had used up her threshold.

There are different thresholds for different categories of donor. http://www.revenue.ie/en/tax/cat/thresholds.html