573 Death

Summary

The transfer of assets on death is not regarded as a disposal and, consequently, death is not an occasion of charge to capital gains tax. The assets of which a deceased person was competent to dispose are deemed to be acquired on his/her death by the personal representatives or legatee at their market value at the date of death. Thus, in relation to a disposal of the assets by the personal representatives or legatee, the period of ownership of the assets for indexation purposes commences from that date.

Personal representatives are chargeable on any gains made on sales of assets during the course of the administration of the estate but there is no charge at the time they hand over assets in specie to the legatees. To facilitate family arrangements after death, there is provision that any variation made by deed of family arrangement in the disposition of the deceased’s assets between the members of the family within 2 years of the death (or such longer period as the Revenue Commissioners may allow) is to be regarded as made by the deceased at the time of his/her death, and the family arrangements are not to be treated as the occasion of a disposal of the assets.

Details

Construction

(1) Assets of which a deceased person was competent to dispose are assets which if the deceased were of full age and capacity he/she would have been able to dispose of by will on the assumption that all the assets were situated in the State and that he/she was domiciled in the State. Such assets include assets in which immediately before death the deceased had a severable share of a joint interest. In some countries immovable property cannot be transferred by will. To cover this case the assumption is made, for the purpose of deciding what assets pass on death, that all assets of the deceased were situated in the State.

Assets passing on death

(2) On death the assets of which the deceased person was competent to dispose are deemed to be acquired by the personal representatives or other person on whom they devolve at their market value at the date of death. (If, however, the death occurred before 6 April, 1974, market value as at that date is to, under section 556(3), normally replace the market value at date of death for indexation purposes.) Also death is not to be treated as involving a disposal of the assets by the deceased and, thus, no charge to capital gains tax arises on the change of ownership on the death.

Carry back of allowable losses

(3) Relief for allowable losses sustained by the deceased in the year of assessment in which he/she dies which cannot be deducted from chargeable gains accruing in that year may be carried back and set off against chargeable gains which accrued to the deceased in the previous 3 years of assessment.

Personal representatives – single continuing body

(4) The personal representatives of the deceased are to be treated as a single body of persons although their personnel may change from time to time. The term “personal representative” is defined for the purposes of the Capital Gains Tax Acts in section 5 by reference to the meaning of that term in section 799.

Transfers from personal representatives to legatees

(5) No chargeable gains are deemed to accrue at the time when the personal representatives transfer the assets to the legatee. Any gain on a later disposal by the legatee is to be calculated as if the personal representatives’ acquisition of the assets had been the legatee’s acquisition of the assets. The term “legatee” is defined for the purposes of the Capital Gains Tax Acts in section 5.

Deeds of family arrangement

(6) The execution of a deed of family arrangement or similar instrument relating to the assets of the deceased not more than 2 years after a death (or such longer period as the Revenue Commissioners may allow) is to be treated as if the arrangement had been made by the deceased. Such arrangement is not, therefore, to be treated as constituting a disposal, and is not the occasion of a charge to capital gains tax. The purpose of the provision is to regard a family arrangement made after death as being for capital gains tax purposes an extension of the terms of a will or intestacy and so to relieve the family of a possible charge to the tax.

The provision allowing the Revenue Commissioners to extend the period beyond 2 years is to cater for cases in which it is not possible for the beneficiaries to complete a deed of family arrangement within 2 years of death. This would occur for example where there is delay due to difficulty of proving title or where there is a large family with some members living abroad. Where an application for an extension is made to the inspector on grounds which are considered reasonable, the inspector may grant an extension for a period which is not to exceed 12 months. The period of extension allowed should be notified to the applicant in writing.

Relevant Date: Finance Act 2021