Revenue Tax Briefing

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Revenue Tax Briefing Issue 41, September 2000

Partition of a Joint Tenancy or Tenancy in Common

Is a contract expressed as being subject to loan approval a conditional contract?

A contract is conditional if the condition attaching is a condition precedent. A condition precedent is a condition which neither party to the contract covenants to bring about but which must be satisfied before an obligation to perform the contract arises. The contract is not enforceable until the condition is satisfied. The granting of loan approval is something removed from the parties and to the contract and cannot therefore be something that they covenant to bring about. The obligation of the purchaser is to complete but if the condition is not satisfied the contract simply comes to an end.

The time of disposal then, is when the condition is satisfied i.e. when loan approval is granted, not when the contract is signed and not when the contract is closed..

Is the partition of a joint tenancy or tenancy in common a disposal for CGT?

Yes. Revenue regard the partition of a joint tenancy or a tenancy in common as being a disposal for capital gains tax purposes. Each party concerned in the severance is disposing of a lesser interest in a part of the property concerned and is acquiring a larger interest in a divided part. The treatment of these matters is provided in sections 534 and 557 TCA 1997.

However, in certain circumstances where the asset is a business asset it may be that the parties concerned would be able to avail of re-investment relief (under section 597 TCA 1997) on their re-investment in replacement business assets.

Is a non resident individual who is liable to capital gains tax here on the disposal of specified assets (land, buildings etc. in the State) entitled to the annual exemption of £1,000 (section 601(1) TCA 1997)?

Yes. A non resident individual is entitled to the £1,000 annual exemption. It should be noted that this exemption is restricted to individuals only - whether resident or non resident. Companies, trustees or other non-corporate bodies are not entitled to it.