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CGT loss or not?

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  • 03-06-2020 10:41am
    #1
    sk8board
    Registered Users Posts: 3,203 ✭✭✭


    Hi,
    I had €200k of ordinary shares in our business and when it was sold a few years ago I cashed €100k (and paid CGT), and rolled forward the other €100k into shares of the new business owners, without any cgt event. (Cgt would have been due once those shares were eventually sold).

    Unfortunately that business has now liquidated.

    Does that mean I have a €100k CGT loss (€33k of tax) that I can carry forward against future gains?


Comments

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    #2
    dogsears
    Registered Users Posts: 535 ✭✭✭dogsears


    What did the original shares cost you? Is that what you mean by "€200k of ordinary shares"?


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    #3
    sk8board
    Registered Users Posts: 3,203 ✭✭✭sk8board


    dogsears wrote: »
    What did the original shares cost you? Is that what you mean by "€200k of ordinary shares"?

    Hi,
    The original shares cost around €1,500.
    In other words, the shares I rolled forward would have incurred CGT at the time, but were somehow moved from the first entity to the second entity without requiring a cgt event to occur.
    Thanks


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    #4
    okidoki987
    Registered Users Posts: 10,618 ✭✭✭✭okidoki987


    If the shares originally cost you €1,500 and are now worthless, then €1,500
    is the amount you can claim as a loss.
    The fact they went to a value of €200,000 is irrelevant as you didn't sell them
    at that.


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    #5
    sk8board
    Registered Users Posts: 3,203 ✭✭✭sk8board


    okidoki987 wrote: »
    If the shares originally cost you €1,500 and are now worthless, then €1,500
    is the amount you can claim as a loss.
    The fact they went to a value of €200,000 is irrelevant as you didn't sell them
    at that.

    Thanks. I understand your point, however they did achieve that €200k valuation when we sold the company (they cost me €1500 back in 2012) - I had the option to take them out at €200k and pay the tax, but chose the option at the time of reinvesting/rolling forward €200k into preference shares of the entirely new company, deferring the cgt event, which I took.

    The purchase of those 200,000 shares @ €1 is all documented and had a shareholders agreement


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    #6
    Calahonda52
    Registered Users Posts: 12,220 ✭✭✭✭Calahonda52


    How did you fund the 200k purchase.
    My sense is that if you deferred the CGT hit, this was done by not crystallising it so as noted earlier the original purchase price still stands.

    The CGT calc is original cost plus any enhancement expenditure, which the 200 is not

    “I can’t pay my staff or mortgage with instagram likes”.



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    #7
    sk8board
    Registered Users Posts: 3,203 ✭✭✭sk8board


    Calahonda52 wrote: »
    How did you fund the 200k purchase.
    My sense is that if you deferred the CGT hit, this was done by not crystallising it so as noted earlier the original purchase price still stands.

    The CGT calc is original cost plus any enhancement expenditure, which the 200 is not

    Highlighted part is my concern for sure.
    I’m still using the tax Consultant who I used to file the cgt return for the shares I cashed out back in 2014, so I’ll check it with them.
    At one point pre covid these shares had a (paper) value close to €1m, so carrying fwd a loss was only ever going to be a silver lining on a nuclear cloud!
    Thanks for your feedback.


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    #8
    dogsears
    Registered Users Posts: 535 ✭✭✭dogsears


    Sounds like you (partly) missed out on a gain in the shares that later evaporated. Your loss is what they cost you, no more, as stated by others. Hard luck!


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    #9
    okidoki987
    Registered Users Posts: 10,618 ✭✭✭✭okidoki987


    sk8board wrote: »
    Thanks. I understand your point, however they did achieve that €200k valuation when we sold the company (they cost me €1500 back in 2012) - I had the option to take them out at €200k and pay the tax, but chose the option at the time of reinvesting/rolling forward €200k into preference shares of the entirely new company, deferring the cgt event, which I took.

    The purchase of those 200,000 shares @ €1 is all documented and had a shareholders agreement

    If you transferred them into preference shares of the entirely new company and as you say, this was done to avoid having to pay the CGT at the time.
    So in the ccase the shares are still standing you the original cost of €1,500 otherwise you would have had to pay CGT on the €200,000 - €1,500 as they would have treated the transfer as a sale which didn't happen.
    If you had paid the CGT, your Capital loss would now be €198,500 but as you didn't, it is only the €1,500 unfortunately
    At one point pre covid these shares had a (paper) value close to €1m, so carrying fwd a loss was only ever going to be a silver lining on a nuclear cloud!

    If you think you could have the €200k as a loss, why would you not say you have close to a million loss to c/f as the shares had a paper value of same?
    The paper value of close to a million would be the same as the 200k transaction, paper value or valuation but not crystallised so the value is irrelevant until they are/were sold.
    I feel your pain.


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    #10
    sk8board
    Registered Users Posts: 3,203 ✭✭✭sk8board


    Thanks - that makes sense alright

    Some background re the €1m - I didn’t say it in the OP, but the pref’s had a very high coupon, compounded over the years, but not paid out. I also had a lot of Ordinary shares, which were also purchased with rolled forward funds from the initial sale, and cgt was also deferred, so it’s the same outcome as my Prefs, I just omitted it for simplicity.


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