Disposition enlarging the value of property
Legislation - Section 38, Capital Acquisitions Tax Consolidation Act 2003.
Where a beneficiary receives property from a disponer and subsequently receives other property from the same disponer and the two properties together are of greater value than if owned separately, the second gift or inheritance is regarded as two separate benefits, i.e.
- the value of the second property and
- the increase in value of the first property as a result of the beneficiary also owning the second property.
Example
Sean is the owner of the entire issued share capital of a private company ABC Ltd. (amounting to €10,000 €1 shares). In October 2001 he gifts 1,000 shares to his partner Susan. The value of these shares is €1 per share. In September, 2002 Sean dies and leaves 5,000 more shares to Susan. Susan is now a majority shareholder in the company and the value of a majority shareholding is €4 per share.
The following benefits are deemed to be taken by Susan:
First benefit - gift in October, 2001 of 1,000 shares valued €1 each = €1,000
Second benefit - inheritance in September, 2002 of 5,000 shares valued €4 each = €20,000 plus increase in value of first benefit of 1,000 shares X €3 = €3,000. Therefore the value of the second benefit is €23,000.
Note that even if a beneficiary has disposed of the first property, for less than full consideration or to a company in which he was deemed to have control, within five years of receiving the second property, the enlargement in the value of the property will still apply.