My divorce settlement gave me our investment property. Will I face a capital gains tax bill?
A divorce settlement transferring an investment property to a spouse may avoid immediate tax but can trigger significant future capital gains tax.Summary
When an investment property is transferred to one spouse as part of a divorce settlement via a court order, the transfer itself does not trigger capital gains tax (CGT) under Irish law. This allows both parties to move forward without an immediate tax liability on the change of ownership.
However, significant tax implications arise if the property is sold later. While the spouse who remains in the original family home may be exempt from CGT under the principal private residence exemption, the spouse who received the investment property as their new home will only receive a partial exemption based on the time they lived there. For the years the property was held as an investment rather than a primary residence, the owner will be liable for CGT on the proportional gain.
Experts advise seeking specialist tax advice during divorce proceedings to ensure court orders are correctly worded. Because tax liabilities depend heavily on specific circumstances and the timing of disposals, it is crucial to understand how the division of assets will affect future financial obligations.
(Source：The Irish Times)