Capital Gains Tax and Inheritance - who's liable!

stabilio

Mother recently passed away. House was left to me and my sister. Elderly uncle is the executor (I'm doing all the paperwork). Probate has been granted. House has not been transferred to me and my sister, it is being sold.
House is now currently sale agreed, and sale value is about 30K more than probate valuation. So there is a CGT liability. But who is actually liable! Me and my sister? Or the executor? Who files the return and makes the payment (if anything due..)

Squatter

"The executor must also pay all of the debts and expenses of the estate and distribute the assets, making sure that all taxes are paid. 
These taxes will include taxes due by the deceased prior to his death, all taxes arising out of the administration of the estate itself, and any inheritance taxes and capital gains taxes arising from distribution of assets."

[font=Sorts Mill Goudy, sans-serif]http://makingawillireland.com/the-role-duties-and-powers-of-an-executor-in-the-administration-of-estates-and-probate/[/font]

stabilio

Thanks

Ricta

and because it is the deceased's estate that is paying the CGT, not the benficiaries, you cannot deduct the annual CGT personal exemption of €1,270 per individual.

There are allowable costs like solicitors and auctioneers fees, advertising costs, perhaps even maintenance costs and improvement costs during the period of the gain, though I'm not sure about those.

tanit

Question for the ones that know more than me. Wouldn't have been more beneficial in this case to have transferred the house to the children and then they sell it?

My line of thought is that they would have the lifetime threshold to deduct from the assets they received and being the mother it's going to be difficult they have used that threshold in full (under the assumption that the house went from the father to the mother and from her to the children). So when they sell the house CGT would be calculated on the basis of the difference of the value they sell less the acquisition value which if there has been a transfer to the children would be very close to market value making CGT very low and CAT more than likely also very low on the basis of using the CAT inheritance thresholds.

I'm also considering that the house does not have things like mortgages that need to be cleared out, etc.

Thanks

stabilio

So Revenue have told me that its me and my sister that have to file a return. Just looked at the forms. Indecipherable...!

Squatter

stabilio wrote: »

So Revenue have told me that its me and my sister that have to file a return. Just looked at the forms. Indecipherable...!

Don't you have to file it online through ROS?

stabilio

Apparently not.... I'm a PAYE worker (jointly assessed with my self-employed husband). So its form 12 for me, form CG1 for my sister (lives o/seas).

• Form CG1 – if you do not usually submit annual tax returns
• Form 12 – if you are a PAYE worker
• Form 11 – if you are self employed, or have income that is not taxed under PAYE
• Form 1 – for a trust or an estate
• Form CT1 – for a company.

Use Revenue Online Service (ROS) to file your Form 11, Form 1 or Form CT1. You can post the Form CG1 or Form 12 to your Revenue Office.

stabilio

OK looking for information on date of disposal for filing CGT. Is it the date contract is signed? Or sale close date. If it is date contract is signed (any day now)... and there's a delay in close... am I supposed to pay the CGT even though we might not have received funds!
Also has anyone any experience in filing a corrective affidavit - CG 25. Probate valuation was very conservative, thinking about having it redone and filing a correction.

nompere

stabilio wrote: »

OK looking for information on date of disposal for filing CGT. Is it the date contract is signed? Or sale close date. If it is date contract is signed (any day now)... and there's a delay in close... am I supposed to pay the CGT even though we might not have received funds!
Also has anyone any experience in filing a corrective affidavit - CG 25. Probate valuation was very conservative, thinking about having it redone and filing a correction.

CGT is payable by reference to the contract date. Yes - it's quite possible to have to pay the tax before you get the proceeds.

Revenue are very reluctant to accept corrective affidavits. Here's a very good article on the problems caused by low probate valuations:

http://www.ohanlontax.ie/downloads/CGTforEstatesinaRisingPropertyMarket.pdf

Historically valuers have put in low values for probate - but there's rarely any benefit when the property is to be sold - and often the conservative valuation creates a tax liability where there shouldn't have been one. +

stabilio

nompere wrote: »

CGT is payable by reference to the contract date. Yes - it's quite possible to have to pay the tax before you get the proceeds.

Revenue are very reluctant to accept corrective affidavits. Here's a very good article on the problems caused by low probate valuations:

http://www.ohanlontax.ie/downloads/CGTforEstatesinaRisingPropertyMarket.pdf

Historically valuers have put in low values for probate - but there's rarely any benefit when the property is to be sold - and often the conservative valuation creates a tax liability where there shouldn't have been one. +

Many thanks for this. Wish Id seen that article last year! And wish estate agent had too!!... not sure where we would find money for CGT if proceeds of sale not transferred by December 15th! Any advice on what to do if that happens? Noting buyer still hasn't actually signed contract.. it's imminent apparently. Go cap in hand and beg for mercy? (Revenue!).

nompere

You might have to borrow - Revenue charge about 10% pa on late paid tax, and your local friendly bank manager is likely to charge less. It's the preliminary tax that has to be paid in December, and Revenue don't actually learn about the sale until you file a return. So they're not going to be hounding you for the tax if it isn't paid on December 15 - but you are likely, eventually, to get an interest bill if it isn't paid on time. I've seen a depressingly large number of interest demands in CGT cases in the last few years, and I've yet to be successful in getting Revenue to agree to any concessions.

You might talk to your solicitor, and ask him to explain the concept of "conditional contracts" and whether there's any scope to defer the tax payment date that way.

Geuze

https://www.askaboutmoney.com/threads/how-does-executor-file-cgt-return-for-the-estate.204856/

This AAM post might help.

98-00

If the will states the house is to go to your sister and yourself, then the two of you are liable for taxes from sale of the house.
If the will stated the value of the house was to go to your sister and yourself, then are taxes from the house sale would paid by your mothers estate.

The difference is that in the first case ownership of the property has moved from your mother estate to you. In the second case ownership stayed with your mothers estate.

In your case I presume you paid inheritance tax on the probate value of the house already. Either you paid this from your own cash or more likely this money was deducted from any cash/other property or items you also inherited.

Edit:

If there was no money in my mother estate to cover inheritance of the house, then the house would have to be sold at your cost, I think.

stabilio

nompere wrote: »

You might have to borrow - Revenue charge about 10% pa on late paid tax, and your local friendly bank manager is likely to charge less. It's the preliminary tax that has to be paid in December, and Revenue don't actually learn about the sale until you file a return. So they're not going to be hounding you for the tax if it isn't paid on December 15 - but you are likely, eventually, to get an interest bill if it isn't paid on time. I've seen a depressingly large number of interest demands in CGT cases in the last few years, and I've yet to be successful in getting Revenue to agree to any concessions.

You might talk to your solicitor, and ask him to explain the concept of "conditional contracts" and whether there's any scope to defer the tax payment date that way.

Thanks so much for taking the time to reply, hugely helpful. Fingers crossed proceeds will transfer in time - if they don't at least I can prepare!