Revenue Note for Guidance

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Revenue Note for Guidance

1031 Divorced persons: transfers of assets

Summary

This section provides that where a person who has obtained a decree of divorce under the Family Law (Divorce) Act, 1996 disposes to his/her former spouse certain assets pursuant to a court order under that Act, a charge to capital gains tax does not arise. The section also provides that where the former spouse to whom the disposal is made subsequently disposes of the asset, he/she is treated as having acquired it at the same time and cost as the other spouse.

Details

Definition

(1)spouse” is to be construed in accordance with section 2(2)(c) of the Family Law (Divorce) Act, 1996, that is, the term includes a person who is a party to a marriage that has been dissolved under that Act.

Disposals of certain assets between divorced persons

(2) Where a decree of divorce has been granted and by virtue of or in consequence of an order made under Part III of the Family Law (Divorce) Act, 1996 one spouse disposes of an asset to the other spouse, then, subject to subsection (3), the asset is treated as having been disposed of at a price which gives rise to no gain or loss.

(2A) The no gain/loss rule does not, however, apply if the spouse who acquires the asset (from the other spouse) could not be taxed in the State (for the year of assessment in which the acquisition took place) on a disposal of the asset in that year and a gain had accrued on that disposal. Such a scenario might arise where the taxing rights on such a disposal, under a Double Taxation Agreement, rested with a foreign jurisdiction.

Relief disallowed for trading stock

(3) The no gain/no loss treatment provided for in subsection (2) does not apply if the asset disposed of is one which formed part of the trading stock of the spouse making the disposal. Likewise, that treatment does not apply if the asset is one which is acquired as trading stock for the purposes of a trade carried on by the spouse receiving it. In each such case the actual consideration is taken into account and the rules for computing trading income generally apply.

Subsequent disposal

(4) Where the no gain/no loss treatment provided in subsection (2) applies in relation to the disposal of an asset and the spouse who acquired the asset subsequently disposes of it (not being a disposal to which that subsection applies), he/she is treated as if he/she had acquired it at the time and cost at which it was originally acquired by the other spouse.

Relevant Date: Finance Act 2020