John purchased an office block in 2007 for €2millon. The value of the office block collapsed to as low as €500,000.00 but has recovered somewhat and is now valued at €1millon.
John died in 2016, his last Will & Testament provides that his wife Mary will inherit the asset.
If we assume that the property is sold for €1.75millon in 2023, Mary’s base cost on that disposal will be market value when inherited – €1millon. Mary will pay Capital Gains Tax on €750,000.00
Alternatively, prior to John’s death, consideration should be given to transferring the office block to Mary.
Again, no tax arises, however Section 579TCA 1997 provides that Mary assumes John’s base cost which is €2millon, notwithstanding that the asset is worth €1millon.
Moving on to 2023 in our hypnotically example, if Mary sales the property for €1.75millon, her base cost for €2millon ensures that a loss of €250,000.00 arises.
The key point is that capital gains fall away on death. So do capital losses.
Clients can become rather disillusioned when dealing with loss bearing assets, and advisors can become casual where no tax liabilities arise, but losses are very valuable and should not be allowed to die.