Assignment
PART A: JODYHIGGINS
You can assume todays date is 31 March 2017.
You are a tax adviser and have been asked to advise JodyHiggins on the proposed transfer of assets to his relatives and friends. You have been provided with the briefing memo below on which to base your advice.
Briefing Memo
To: File of JodyHiggins
From: Tax Adviser
Date: 31 March 2017
Re: Meeting with JodyHiggins
Jody aged 58 is an Australian domiciled individual and moved to Ireland in 2003 to live with his long term partner. Jody's partner died in 2009. In her will Jody's partner bequeathed him 100% of her shares in her manufacturing company valued at €600,000, together with a house and half-an-acre of grounds (situated in Ireland) valued at €440,000 (these were the value of the assets in 2009 on the valuation date). Jody immediately invested €800,000 of additional capital in the company. In 2011Jody personallypurchased a new premises at a cost of €2,040,000 and rented this premises to the business.
Recently, Jody has been diagnosed with a terminal illness and wishes to get his affairs in order. He would like to transfer his assets to his loved ones before he dies asopposed to transferring his assets on his death. He is not interested in the tax implications for himself on the transfer. At this time he is more interested in the implications for his loved ones. He intends to gift his assets to his brother Michael, Michael's childrenJohnand Jennifer and his friends andVanessa and Peter.
Michael, John, and Jennifer are all Australian domiciled.Jenniferand Michaelmoved to Ireland in November 2015. John moved to Irelandin 2011. Vanessais French and has lived in Ireland for the past two years.
Jody intends to make the following gifts:
John
The shares in the manufacturing company to his nephewJohn. The shares in the company are currently valued at €3,800,000 and the shares are comprised of trading assets of €3,400,000, made up of plant and equipment and financial investments of €900,000 and operating liabilities of €500,000. John has worked full-time in the business with Jody since arriving in Ireland.John will also receive the business premises. The premises have been leased to the manufacturing company since its purchase. The premises is currently valued at €1,360,000.
Jennifer
The house and half an acre grounds to Jennifer, subject to the right of residence, support and maintenance for Michael (aged 69).Jody has lived in this house since 2003. Michael's right of residence, support and maintenance is valued at 25% of the value of the house and grounds. The house and grounds are currently valued at €700,000.
Vanessa
His holiday home in France to his friend Vanessa. The property is valued at €1,000,000 and had cost Jody€1,530,000 in 2007.
Peter
Peter is currently completing his agricultural science degree in a university in Dublin. Jody has a savings fund worth €700,000 and would like to give this to Peter on the basis that he invests this funds in agricultural property within the next 12 months. Peters only other asset is a car worth €6,000.
None of the potential beneficiaries has received any prior benefits.
REQUIREMENT:
(i) Draft a letter to Jody advising him of the capital acquisitions tax (CAT) and stamp duty implications arising from the transfer of assets to:
• John
• Michael
• Jennifer
• Vanessa
• Peter
Note: It is necessary to clearly indicate and discuss all reliefs (if any) available to the beneficiaries on the receipt of the benefits as well as providing CAT calculations (where necessary) in the appendix to your letter.
Professional marks will be awarded in question for the appropriateness and format of the letter and the effectiveness with which the information is communicated.