Valuation date and the value of benefits

Taxable value of a gift or inheritance

You pay Capital Acquisitions Tax (CAT) on the taxable value of a gift or inheritance. The taxable value is the market value of the gift or inheritance less: 

  • allowable liabilities, costs or expenses
  • any consideration paid in money or money’s worth

Only liabilities, costs or expenses which you have actually paid are allowable in calculating the taxable value of your gift or inheritance. 

While administering an estate, the personal representative must pay certain expenses and liabilities before distributing the residue to the beneficiaries. These may include: 

  • funeral expenses
  • outstanding pre-death taxes of the disponer
  • other pre-death liabilities of the disponer, for example, a bank overdraft or mortgage
  • costs of administration of the estate
  • legal costs
  • Income Tax and Capital Gains Tax liability that arises during the administration of the estate.

An inheritance of the residue, or a share of the residue, is normally the net amount after payment of any of the above. Where liabilities have already been paid by the personal representative, they may not also be deducted by beneficiaries.

Note

Funeral expenses cannot be claimed on the IT38 return where these expenses have already been paid as part of administering the estate.

 In the case of a gift, allowable deductions are generally: 

  • stamp duty
  • legal costs. 

Consideration

Consideration paid is an allowable deduction when calculating the taxable value of a gift or inheritance, where, at the disponer’s direction:

  • you pay consideration of money, or money’s worth, to the disponer or to another person
  • or
  • you discharge a liability of the disponer
  • or
  • you pay an annuity to the disponer or to another person.

Consideration paid on receipt of a taxable gift or inheritance is always an amount less than the full market value of the asset.

Liabilities, costs or expenses not deductible  

Certain liabilities, costs, or expenses are not deductible. These include: 

  • debts incurred where you can claim reimbursement
  • debts payable at an uncertain date in the future
  • certain debts relating to foreign property where only Irish property is taxable
  • debts relating to exempt property.

Deductions for services rendered  

If you make a deduction for services rendered on behalf of the disponer, you must provide evidence of a legally enforceable agreement for the sums claimed. These services may include looking after the disponer while ill, doing their shopping, helping with church visits or claims for wages.

Next: Limited interest