Dominic Coyle answers your personal finance questions.

Inheritance

I own a house conjointly with my sister. The dwelling house is worth €70,000 or maybe €80,000. If one of us dies, will the other have to pay inheritance tax? Will such a tax, if it operates, be on half the price of the house? P.G., Kerry

As always, it depends. In this case, the most important thing is whether both of you are occupying the house as your main home, or principal private dwelling to use the Revenue jargon. If not, then your sister may face some liability to inheritance tax, officially known as capital acquisitions tax, depending on the value of the property.

Whether it is an investment property for both of you or one that you both own but only you use as a main home, your sister would be liable to the tax, presuming the value of the property was substantial enough or she had previously inherited from a brother, sister, niece/nephew or other direct relation (not a cousin). There is, however, some relief.

First, your sister would certainly only be liable to inheritance tax on that portion of the property she did not already own - i.e. your half.

Secondly, there is a threshold below which people do not pay tax on inheritances. This threshold varies according to the relationship between the parties but, in 2004, for property passing between siblings such as yourselves, the relevant threshold is €45,644.

Assuming the property is worth €80,000 at your death - and the tax authorities would require an official valuation on the property at that stage - your sister would be unlikely to face any tax bill on the bequest of your half of the house, assuming she receives nothing else in the will and has not previously received bequests from siblings or other linear relations.

Now if this is your main home and your sister is living there, she may well avoid having to worry about inheritance tax altogether. A provision introduced in the 2000 Finance Act allows for someone who has resided in a property for three years prior to inheritance and who continues to live in the property as their only or main residence for a further six years thereafter to claim an exemption on inheritance tax in relation to the property.

The key point is that the property must be the main accommodation of your sister throughout the period and she cannot hold any other house.

Credit cards

I would really like to take advantage of the Tesco credit card offer (where it pays the stamp duty in the first year and you also earn points on purchases), but I do not want to pay a single cent more to Minister McCreevy. Is there an optimum time to cut over to a new provider and avoid paying stamp duty on the soon-to-be-closed account? Mr P.O' N, email

Yes there is - before April 1st. Despite the concerted, and largely sensible, co-ordination of the tax year with the calendar year, Mr McCreevy has seen fit to continue with the old April to March year for stamp duty on bank and credit cards.

While this made some sense when the measure was first introduced, there seems little reason for his refusal to adjust the dates in the last Budget.

That being so, you just need to ensure that you have made the switch to the new card account before April 1st as that is the date that stamp duty will kick in again on the current account.

With Tesco agreeing to pay the stamp duty on its card, your only concern is making sure that the existing account is no longer open by the close of business on March 31st.

Tesco is not the only card provider offering to pay the 40 stamp duty. Ulster Bank will also meet the charge for those customers spending a certain amount on its card. The threshold is €5,000 spent on an Ulster Bank credit card between January 1st last year and December 31st this year.

It may sound high but, for those using credit cards on a regular basis, it works out at just over €450 a month for the remainder of this year.

The downside is that the €40 "reward" is payable after you hit the target and you will already have paid out the stamp duty.

Capital losses

Could you clarify the position on capital gains tax? How much are a husband and wife allowed earn in capital gains before they become liable to tax? (I am retired and my wife has not worked since we were married.)

For the year 2002, I declared the sale of shares at a profit of €6,173, and a loss on other shares sold of €5,052.

If I reduce the profit by the capital gains tax allowance, am I allowed carry forward as relief any surplus loss of that year? Mr R.S., Dublin

The most important thing to note on capital gains tax relief is that the relationship between yourself and your wife counts for nothing to the Revenue. The tax relief granted each year on capital gains is particular to the individual and cannot be transferred, regardless of the relationship.

So, while each of you is entitled to relief of €1,270, you can use it in relation to assets that yield you a profit. In this instance, if the shares are in your name only, you are entitled only to one set of relief - €1,270. If the shares are in your wife's name, then you are entitled to no relief and she is entitled to the €1,270.

If, for instance, the shares that yielded a profit were in your name while the others were in hers, the capital loss would apply only to her and could be set against future gains only on assets in her name. The same applies if the positions are reversed.

The only situation where both of you can avail of tax relief on the one transaction is if the asset - in this case, the shares - is in both your names.

Assuming, for the moment, that the two sets of shares are in your name only, you will be able to avail of one set of relief for 2002 to the tune of €1,270.

Now looking at the second part of your question, I can see your point that, if the relief were applied against the profit before offsetting the losses you would still have a loss to carry over to the following year - i.e. €6,173 profit - €1,270 tax relief = €4,903, which offset against losses of €5,052 leaves an outstanding loss of €149 to carry forward.

However, the Revenue says that people need to tally profits and losses on the sale of assets in any given year first. Only at this stage is the relief applied to any profit remaining before tax is levied on the balance, if any, at 20 per cent.

In your case that means the €5,052 loss on one share transaction is set against the €6,173 profit on the other share trade, yielding a net profit of €1,121.

This is less than the €1,270 tax relief threshold for capital gains and, so, no capital gains tax liability arises. Equally, there is no loss carried forward.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. 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 queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.