Judgment reserved in inheritance tax case with wide implications

The action relates to a ruling by a Tax Appeals Commissioner (TAC) last year that Dublin woman Leanne Deane is entitled to an exemption under section 86 of the Capital Acquisitions Tax Act 2003, known as the dwelling-house exemption, after she inherited her family home at Aranleigh Mount, Rathfarnham, Dublin.

The action’s outcome has implications for many other similar cases.

Ms Deane’s father, who was predeceased by his wife, died in October 2010. She and her brother inherited equal shares in their father’s estate. Under a deed of family agreement, they agreed she would inherit what had been the family home, where she has lived for many years prior to her father’s death, and where she currently resides.

Under that 2011 agreement, Ms Deane also acquired a share in four other residential properties. Her brother, as part of the agreement, received an interest in other assets in their father’s estate.

She applied for an exemption the under the 2003 Act, which was refused on the basis she had inherited a share in the other properties.

She received a notice of assessment from Revenue that she had to pay €52,000 in Capital Acquisitions Tax as a result of inheriting the family home.

She appealed that finding to the TAC which found in 2017 that she had satisfied the conditions necessary to avail of the section 86 exemption in respect of her family home and reduced the assessment to zero.

Arising out of the TAC’s decision Revenue, represented by Jacqueline O’Brien SC, has asked the High Court to determine several questions including if the decision that Ms Deane is entitled to claim the exemption is correct in law.

Revenue also wants the court to determine if Ms Deane was precluded from claiming the exemption on the basis she was at the time of the inheritance beneficially entitled to any other dwelling houses.

In submissions to the court, counsel said the TAC had erred in the manner in which the decision had been arrived at.

Counsel said that section 86 of the act was designed to ensure that persons who inherited family homes, where they themselves had been living, would not end up with a tax liability that would result in them having to sell the property and ending up homeless.

Ms Deane, represented by Martin Hayden SC and Eoin O’Shea BL, says she is entitled to the exemption and the TAC’s decision should be upheld.

Counsel said that at the date of her father’s death she did not have any interest in any other dwelling houses other than the family home.

She only came to have such an interest at a later date. Had she a share in another property before her father died she would not be entitled to the relief claimed.

It was also argued that legislation concerning inheritance tax ought to, but fails to provide certainty for such tax payers.

The case was heard by Ms Justice Caroline Costello who, following the conclusion of submissions from both parties, reserved her decision.

Aodhan O’Faolain, Ireland International News Agency Ltd.