This month’s case is likely to be of interest to practitioners dealing with complex inheritance cases involving multiple properties. It looks at the High Court’s recent decision to uphold the finding of the Tax Appeals Commission in favour of the taxpayer in relation to the entitlement of dwelling house exemption on the inheritance of a family home, where the beneficiary also inherited an interest in four other properties from the deceased’s estate.

Background

The High Court heard a case (Leanne Deane and The Revenue Commissioners) following a TAC ruling in favour of the taxpayer. The case relates to the question of whether Ms. Deane is entitled to avail of the exemption in accordance with section 86 of the Capital Acquisitions Tax Act, 2003 (CATCA 2003) known as – dwelling house exemption. The relief allows for an individual to receive a gift or an inheritance of a house without having to pay a liability to CAT. The exemption is to protect the interests of people who live in the family home from having to sell the home in order to pay the CAT liability which would otherwise be chargeable. In order to avail of the exemption the follow conditions (that were in force at the time) had to be met:

• The individual must have lived in the house for three years prior to the gift or inheritance.
• The individual must not be beneficially entitled to any other house, or any interest in any other house.
• The individual must occupy the house as his or her only or main residence for a period of six years after the date of the gift or inheritance.

Facts of the case:

• Ms. Deane had resided in the family home since childhood and in particular throughout the period of three years immediately preceding the date of inheritance and for a continuous period of six years after.
• The testator (Ms. Deane’s father) died on 27 October 2010.
• The net estate was ascertained on 29 March 2011.
• Ms. Deane inherited from her father, 100 percent interest in the family home along with a 50 percent interest in four other residential properties.

Decision

The High Court had to determine on a number of issues, the first of these was the meaning of ‘date of inheritance’ within section 86 CATCA. It was held that in this case the date of inheritance was the date of death of Ms Deane’s father, 27 October 2010 and that is the date that must be used when assessing section 86 CATCA.

The second issue the High Court had to address was whether at the date of inheritance, Ms. Deane was not beneficially entitled to any interest in any other house. Section 10 of the Succession Act, 1965 provides that the estate of a deceased person will on his death, become vested in his personal representatives in order to discharge expenses (funeral expenses, legal costs etc.) and liabilities that may arise and as a result property in the estate may not become available to the beneficiaries until the costs and expenses are settled.

It was decided upon that as a matter of succession law, Ms. Deane did not become beneficially entitled to any interest in any of the dwelling houses until the net value of the estate was established i.e. on 29 March 2011. The date of inheritance did not import that the date of death and the date Ms. Deane became beneficially entitled to the benefit as the same event. Furthermore, the Court found that Ms. Deane was not required to be beneficially entitled to the family home at the date of death of her father.

In conclusion, the High Court found that at the date of inheritance of the dwelling house, the appellant was not beneficially entitled to any other dwelling house or to any interest in any other dwelling house within the meaning of section 86(3)(b) CATCA 2003 and therefore met the exemption criteria. Relief was granted.