Quite often I come across the situation where a client has inherited shares. It may be a recent inheritance or they may have held the shares for a number of years, but at some stage the shares may be sold.
The taxation consequences of this sale transaction depends on a when the shares were purchased or acquired by the deceased.
I understand that at the time a deceased estate is being processed, documentation may not be at the forefront of your mind – but I hope this post will help you to remember the things you need to find out if/when you inherit shares.
If the shares were acquired by the deceased before the introduction of Capital Gains Tax (CGT), then you need to consider the value of the shares at the date of death, as this will form part of your cost base and purchase date for CGT purposes.
If the shares were acquired by the deceased after the introduction of CGT, then you need a lot more information including the original date purchased and the original amount paid. You will also need to determine any CGT events that may have taken place during the deceased’s ownership (such as dividend reinvestments or share re-structures), as this will form part of your CGT calculations.
If you sell the shares you inherited after some time has passed from the date of death, you may find it difficult to access the information and documents you need…
So if you hold shares I recommend you ensure your records are up to date and easily accessible for your family members, and if you inherit shares I hope you can now remember to ask some questions of the Executor so you can get the information you need, sooner rather than later.
PS Remember to read the disclaimer