Tax on Seperation

onlinepal100

A friend of mine has recently separated from his partner after 18/20 years of a relationship.
She owned the family home and remains there.

Some years ago she received a gift from her brother (shares) and that portfolio grew to a substantial amount during the time she held the shares and bought and sold using the initial portfolio as a base.

She paid no tax on the gift originally.

As part of the formal separation agreement she is giving him a cash amount of approx. 120k raised by selling some of the shares.

What tax liability might he have?

Any help/guidance appreciated.

ACCA1916

Firstly, where they actually married or just partners?

Assuming they are married, she should transfer shares to him which is exempt for CGT as a husband-wife transaction, cost base that he would have in disposal is that of the original wife's which should be the market value at the date she was gifted them by her brother.

This means he would pay no CAT on transfer of ownership (if its done correctly) but would pay Capital Gains Tax only if he sells the share portfolio with a cost base of market value at the date his spouse was gifted them.

Depending on cost base, he could sell a small few shares ever year and use his annual exemption of €1,270 but if he wants to cash in on them immediately his exposure will be market value based less market value cost at 33% with a small deduction for annual exemption..

onlinepal100

Thanks for the reply ACCA...

Sorry for any confusion. As I said in my ad, my friend and his partner were just that, partners, not married. What she actually gave was cash no shares and no other property.

My understanding is that, in these circumstances, CAT of 33% (2017 rate) will apply to the difference between the gift limit for 2017 (16,250) and the value of the gift!

If the gift was received in a year with a different CAT rate I assume that rate will apply but interest and penalties may apply! Voluntary disclosure may allay the imposition of penalties/interest.

ACCA1916

onlinepal100 wrote: »

Thanks for the reply ACCA...

Sorry for any confusion. As I said in my ad, my friend and his partner were just that, partners, not married. What she actually gave was cash no shares and no other property.

My understanding is that, in these circumstances, CAT of 33% (2017 rate) will apply to the difference between the gift limit for 2017 (16,250) and the value of the gift!

If the gift was received in a year with a different CAT rate I assume that rate will apply but interest and penalties may apply! Voluntary disclosure may allay the imposition of penalties/interest.

Assuming that she sold the shares and then gave him the cash (and its not a loan), there are 2 issues that comes to mind -

1) She has made a disposal and she is subject to capital gains tax.

2) He has received a gift and he would be subject to Group C threshold of 16,250 plus 3,000 annual small gift exemption (if gift was made after Dec 16).

Not very tax efficient!

ACCA1916

Has the gift already been made? Has he received the cash from her?

onlinepal100

4 or 5 years ago!

Issue comes up now because he has a declaration to make in relation to a Capital Gain on the sale of his deceased mothers home.