Share gains in given year set against losses

Q&A: Q I am about to cash in shares in Tullow Oil but I don't think I should have to pay CGT as I lost about €23,000 in Anglo Irish. Is this true?

Mr M.D., Cork.

A Capital gains tax (CGT) is levied on the profit a person makes between the purchase and sale of an asset. While the tax is assessed on an annual basis, there are two separate payments dates, depending on when the gain was made.

However, you are correct in your assumption that gains made in a particular year are set against losses in that same year before assessing a person’s liability to capital gains tax.

Where the loss exceeds the gain in any year, that loss is carried forward to following years until such time as you have realised sufficient gains to fully offset the loss.

The only question that seems to arise in this case is the nature of your loss.

You state that you have lost €23,000 on your investment in Anglo Irish Bank.

Was this a loss realised through the sale of Anglo Irish stock before the bank’s ultimate nationalisation last February or are you taking that nationalisation as the point at which the loss was incurred?

The importance of this is that the Government stated at the time the bank was nationalised that it would appoint an assessor to adjudge the real worth of the shares that were now moving into State hands. To date no such assessment has been published.

That makes it difficult to determine the true value of shares held in the bank when it collapsed.

Unless you are in this situation and the value of your Tullow gain more or less matches the expected loss on Anglo, it is not really a concern as any “residual” value in Anglo stock at the point of nationalisation is still likely to leave long-standing shareholders suffering major losses.

I would be surprised if the Revenue was to refuse to allow you use the Anglo loss this year regardless of any assessor.

Q With regard to the annual €3,000 gift between individuals that is not taken into account when calculating inheritance tax, can an individual receive €3,000 from any number of people in a given year without incurring a tax liability?

On a separate note, an individual is living, working and paying tax abroad for a number of years and in that period receives gifts of say €50,000 over a five-year period from a parent.

The individual returns to live in Ireland. When calculating inheritance tax liability from the parent, is that €50,000 taken into account?

Mr T.M., Dublin

AMy understanding is that, for the purposes of capital acquisitions tax, the first €3,000 of any gift from any person to any other person in a given tax year is exempt from calculation.

On the second point you raise, the threshold for capital acquisitions tax is cumulative. The fact that you were out of the State when you received certain sums does not mean that the slate will be wiped clean when you return.

The €50,000 received – minus the first €3,000 in any given year – will form part of the cumulative threshold of €434,000 allowable between a parent and a child.

Q I understand the limit between a parent-child is €521,000, not €434,000?

Mr D.I., email.

AThe threshold between a parent and a child for capital acquisitions tax/inheritance tax purposes was €521,000 until earlier this year, having risen in successive years in line with the consumer price index.

However, in the emergency budget, the Minister for Finance, Brian Lenihan, announced a cut in the threshold to €434,000.

Q You are correct with the “precise” figure for the Group B threshold for linear relatives of €43,400. Unfortunately, a cousin is not within that group and the threshold is €21,700 - Group C.

Mr D.B., email

AA couple of correspondents have been in touch with me to point out the same thing. While the Group B threshold (currently €43,400) does apply to linear relations other than parents such as siblings, nephews, nieces and grandparents, it does not apply to cousins.

They, unfortunately for them, are ranked as “strangers” in Group C where the current threshold is indeed €21,700.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.