My grandfather died in 2003 when I was five years old. A year or two before he passed away, he gave me a collection of stamps and coins which remained in my parents’ attic as I have never had an interest in stamps or coins. I recently got the collection valued and a value of approximately €25,000 has been put on the collection. We had no idea that the collection had any significant value.
I now intend to sell the collection. Would you be able to provide some guidance on the tax implications for me if I sell the collection?
Mr J.R.
No doubt your grandfather hoped the gift of his collection would spark in you the same enthusiasm he had for collecting stamps and coins but, as you say, that never materialised.
Stamp and coin collecting seems somewhat quaint now but it was a mainstream hobby among older generations, albeit at a time when foreign mail and travel (and the stamps and coins that went with them) seemed more exotic. And, of course, the internet and mobile phones had not arrived to hasten the demise of the written letter.
Storing a collection gifted to a three-year-old safely out of harm’s way was the obvious thing to do. And, especially with your grandfather dying shortly afterwards, it’s not too surprising that the collection slipped off the radar of a young family. That’s the peril of attics: anything that goes in rarely comes out, apart the annual rousting of Christmas decorations.
As you now know, this was clearly a more valuable gift than anyone realised at the time, and that presents you with both an opportunity and a headache.
The collectibles community is fairly tight-knit and niche, certainly in Ireland, so it is likely that any valuation you have been given will be fairly accurate.
For a young man in his mid-20s, as you now are, a €25,000 windfall provides all sorts of options, from giving you the finance and the freedom to look at working or living abroad for a time to kick-starting a house deposit or even giving you the wherewithal to establish an early investment pot of your own.
But it does, as you suspect, bring with it a potential tax bill.
Collections of stamps and coins, like art or investment property, will be seen by the Revenue Commissioners as assets. And when an asset is sold, the seller is liable to capital gains tax on the difference between the value of the asset when it was acquired and its value now.
You are allowed to make a capital gain of €1,270 in any one year – an odd figure which comes about through a rough translation of the old £1,000 allowance from pre-euro times, which shows you just how long it is since there has been any adjustment to that figure.
You know the collection is now valued at €25,000, though the key figure will be the price you actually receive from any sale. What you also need, however, is an assessment of its value 21 or 22 years ago when it was given to you by your grandfather.
This is a recurring headache, especially within families. We give and receive gifts that may or may not have a financial worth all the time but no one thinks to record a value for future tax requirements. To ask would be rude and to presume they have a monetary value just seems to be taking the good out of the sentiment, reducing all gifting to a commercial arrangement.
The best way to get this might be to go back to whatever assessor gave you the current valuation. It will necessarily be an estimate but having something on paper will be useful when dealing with Revenue.
Once you have the relevant figures and after you have sold the collection, you will need to file a return with Revenue and pay capital gains tax (CGT) at 33 per cent on any gain over the annual tax-free exemption of €1,270.
A second potential issue relates to capital acquisition tax (CAT) – better known as gift or inheritance tax.
We are all entitled to receive a certain value in gifts and inheritances free of tax. How much depends on the relationship between the beneficiary and the person giving the gift or inheritance. A gift from a grandparent to a grandchild falls under category B, where the lifetime tax-free limit is now €32,500, so your collection would not exceed that.
Of course, the key thing again is not its current value but the value at the time the gift was made – and how it compared to the tax-free limit at the time.
Clearly the value would have been less than €25,000 and that’s important as it leaves you more latitude for tax-free gifts or inheritances under category B – from grandparents, siblings and aunts/uncles – in the future. As for the tax-free limit back in 2001 and 2002, ironically it was higher then than it is now – above €40,000 in both years.
Another factor to consider when it comes to gifts is what is known as a small gift exemption. Between the start of 1999 and the end of 2002, this was €1,270. Since January 2003, this has been set at €3,000.
This would exempt the first €1,270 in value of all gifts given to you by your grandfather in any year before 2003. If the stamp and coin collection was worth less than that when your grandfather gave it to you, no CAT liability arises, and your tax-free CAT limit remains intact and fully available to you. If it was worth more than that, the first €1,270 would be discounted against your lifetime limit.
Exemption under the CAT rules does not affect any liability you would have under CGT.
For what it is worth, your grandfather would also have had a potential tax liability on the gifting of his collection. In the circumstances, I very much doubt he even considered that or that it was assessed when his estate was put to probate after his death. At this stage, it is a moot point as no one from Revenue will be trawling back 20 years over an inadvertent error.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
