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GAZETTE
APRIL 1989
is deemed to be taken when a
person (the Transferee or
Donee) takes property under a
disposition otherwise than for
full consideration in money or
money's worth paid by him. In
arriving at the taxable value of
the gift, Section 18 (2) of the
Act allows a deduction for any
bona fide
consideration in
money or money's worth paid
by the Donee. Stamp Duty may
also be a good deduction if in
fact it was paid by the Donee.
In such a case the Stamp Duty
would be regarded as a liability
properly payable out of the gift
(Section 18 (1) of the Act).
Payment of the Stamp Duty by
the Donee would not be re-
garded as partial consideration
under Section 18 (2)(a) of the
Act because the Transferor is
not liable for the Stamp Duty
and therefore the Donee is not
taking over a liability of the
Transferor. The provisions of
the latter sub section would
apply to Capital Gains Tax paid
by the Donee, as this would be
a liability of the Transferor
taken over by the Donee. The
Donee is primarily accountable
for the Gift Tax. The Transferor
(Disponer) is also accountable.
3. Capital Gains Tax:
The transfer of an asset by way
of a gift is a disposal for Capital
Gains Tax purposes. Section 9
Capital Gains Tax Act 1975,
states that a person's disposal
of an asset shall, for the
purposes of the Act, be
deemed
to be for a
consideration equal to the
market value of the asset when
he disposes of the asset
otherwise than by way of a
bargain made at arm's length
(including in particular where
he disposes of it by way of
gift).
Under Paragraph 3 Schedule
1 Capital Gains Tax Act 1975,
sums allowable as a deduction
from the consideration in
computing Capital Gains Tax
include the incidental costs to
the transferor of the dispdsal of
the asset. These incidental
costs are stated specifically to
include Stamp Duty. If however
the Stamp Duty was already
deducted for Capital Acquisi-
tion purposes, on the basis that
it was paid by the Donee, then
it would not be a deduction for
Capital Gains Tax purposes as
it would not have been paid by
the Transferor.
It appears therefore that
Stamp Duty is a good de-
duction for either Capital Gains
Tax purposes or for Gift Tax
purposes, but not for both
taxes.
The Transferor is account-
able for the Capital Gains Tax
(Section 4 Capital Gains Tax
Act 1975). The tax is also
recoverable from the Donee if
the Transferor has not paid it
within twelve months from the
date when the tax became
payable. The Donee, however,
has a right to recover the tax
from the Transferor as a simple
contract debt (Paragraph 18
Schedule 4 Capital Gains Tax
Act 1975).
Section 63 Finance Act
1985, as amended by Section
66 Finance Act 1988, allows
Capital Gains Tax to be credited
against Capital Acquisitions
Tax. Where Gift Tax is charged
in respect of property on an
event happening on or after
30th January 1985 and the
same event constitutes a
disposal of that property for
Capital Gains Tax purposes,
Capital Gains Tax payable is not
deducted in ascertaining the
taxable value of the property
for Gift Tax purposes but,
insofar as it has been paid, it
shall be deducted from the net
Gift Tax as a credit against the
same; for example Mr. X makes
a gift of his farm to his cousin
and the Gift Tax payable
amounts to £10,000. Capital
Gains Tax of £4,000 is also
chargeable on the disposal.
The Gift Tax liability is reduced
by £4,000 to £6,000 so that
the total tax payable on the
disposition is £10,000, that is
Gift Tax £6,000 and Capital
Gains Tax £4,000.
In advising in a gift situation
the
relevant
legislation
regarding Stamp Duty, Capital
Acquisitions Tax and Capital
Gains Tax must be considered.
To enable a practitioner to
assess the fiscal liability of his
client in these areas much
more information is required
than would be necessary if the
Stamp Duty liability alone was
being considered.
The following check list may
be of assistance in enabling a
practitioner to obtain all the
essential information.
For example, in the case of A
purporting to transfer immov-
able property to B, the
following data would be
essential in order to advise on
the tax consequences of the
transaction.
(A) Regarding the Property
to be Transferred:
(i) It is essential to
ascertain the market value
of the property at the date
of the transfer for all three
taxes.
While it is generally
accepted that the same
market value should apply
for all cases, in practice it
does not always work out
that way. Market value is
essentially a matter for
agreement between the
parties involved and a third
party ought not to be bound
by
such
agreement.
Accordingly, if the Revenue
Commissioners agree a
market value for Gift Tax
purposes with the Donee,
this should not bind the
Transferor, who is account-
able for the Capital Gains
Tax, however much it may
inhibit the Revenue Com-
missioners in arguing
another value later for
Capital Gains Tax purposes.
In practice, at the initial
stage, the Revenue Com-
missioners value property
for Stamp Duty purposes
only, unless requested
otherwise by the taxpayer
and notify the taxpayer ac-
cordingly. Neither side is
therefore bound by that
valuation for the purposes
of Gift Tax or Capital Gains
Tax. This practice speeds up
the adjudication process
and is acceptable in
general. However, if a prac-
titioner wishes to agree a
market value for all three
taxes, he should inform the
Revenue Commissioners
and they will act according-
ly. It is understandable that
the Revenue Commis-
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