Disposal of Inherited Property

Johnboy1951

If I inherit a property and pay inheritance tax on that property, then immediately sell the property, on what value is CGT calculated?
On the inherited value
or
on the inherited value plus tax paid?

Taking an example of inherited property valued at €100K and tax paid of €33K and then sold for €150K.

On how much is CGT calculated
€150K - €100K = €50K
or
€150K - €133K = €17K

SureYWouldntYa

There's no deduction for any CAT (Capital Acquisitions Tax - ie Inheritance Tax) paid, although there can be a credit given for CAT against any CGT paid by the disponer for the same event (eg transfer of the house during lifetime rather than inheritance, the child would have a CAT credit for any CGT paid by their parent, not applicable in this case as there are two events)

In your example, the gain is €50k and taxed accordingly for CGT, your CGT bill will be circa €16k

It might feel harsh to be feel like you are double taxed but they are different taxes, one on the inheritance and one on the gain

Sometimes people may feel like they're being smart getting a house valued low when inheriting but it will catch up to in the end if you sell the house, you'll either pay CAT or CGT which are both the same rate. If the inheritance was from a parent where you have nothing further to inherit and there is unused CAT Group A threshold remaining then you should question the €100k valuation and perhaps seek to get that increased, it may not be correct depending on the time involved between inheritance and sale. If there no group threshold remaining then its a mute point as you'll end up paying the same in the end.

tohaltuwi

I am the only child of may late parents, my father dying a good numbers of years before my mother did. As soon as the family home became my mother’s she suggested I might like to buy my own apartment of my choosing, where she could live out her days with me, which happened. That way I didn’t have to face tax liabilities when she died, it was her way to save me such hassle and potential upheaval after she died. In my case this arrangement worked out very well, I paid the Capital Acquisitions Tax, new apartment transferred into my name and I had the balance. She lived on with me about 6 / 7 years after that until her death in old age.

This kind of thing works out very nicely in cases where there’s nobody else involved in inheritance, and the arrangement appeals to all parties. It simplified things for me.

Geuze

https://www.boards.ie/discussion/2058355377/disposal-of-inherited-property

A house can't appreciate by 50k "immediately", so your example is poor.

Even the Irish property market isn't that bad!!

Geuze

https://www.boards.ie/discussion/2058355377/disposal-of-inherited-property

It seems here that the property was undervalued for CAT purposes?

Johnboy1951

https://www.boards.ie/discussion/comment/122242369#Comment_122242369

Thank you for the comprehensive reply …. and the realisation that I had provided example monetary amounts and not real numbers.

downtheroad

https://www.boards.ie/discussion/comment/122243035#Comment_122243035

Why can't it? Bidding wars happening daily around the country. There's no reason somebody can't inherit a property valued at a certain figure, and a bidding war causes it to sell for substantially more.

Geuze

In the space of a week? A month?

downtheroad

https://www.boards.ie/discussion/comment/122250796#Comment_122250796

could easily happen. You've obviously never been in a bidding war for a property. Go look at the accommodation and property thread.

Donald Trump

You pay the same rate on CGT and CAT (above thresholds). Thinking you could subtract one from the other makes no sense.

Assume for simplicity you've already exhausted your lifetime threshold. You inherit a house. Two scenarios:

1. You have it valued at 100k for CAT then sell it for 200k. You pay CAT on the first 100k and pay CGT on the other 100k
2. You have it valued at 199k for CAT and then sell it for 200k. You pay CAT on the 199k and pay CGT on the 1k

It makes no difference how long it takes for the hypothetical change to manifest itself.

combat14

houses prices down the country have literally jumped about 20% 200k to 250k in the last couple of months in a very short space of time