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Assignment Task

 

Case study

It is 2nd October 2021. You are a tax consultant working in a large accountancy firm, Martin & Evans, located in Dublin. Together with the tax partner, Peter Martin, you recently met with clients of the firm, Brendan Dobson (58 years old) and his wife Lotte (49 years old).
Brendan is Irish tax resident and Irish domiciled and Lotte is a Dutch national. The couple live together in their Dublin home with their two young children (ages five and seven), both of whom were born in Ireland. Lotte has been Irish tax resident since 2004 and is Dutch domiciled. She has a son Lucas (22 years old) from her first marriage. Lucas has always lived in the Netherlands where his father brought him up after Lotte remarried and moved to Ireland.
Brendan owns 100% of the shares in Dobtex Ltd (“Dobtex”). Dobtex, a trading company, was incorporated on 1 January 2008 when Brendan subscribed €75,000 for 75,000 €1 ordinary shares. Brendan previously worked full-time as an executive director of Dobtex from 1 January 2008 to 31 December 2020. Although he no longer works full-time for the company, Brendan remains as a company director.
Dobtex manufactures specialist telescopes which it supplies to observatories across Ireland and Europe. The company currently owns two telescopes valued at €325,000 and €340,000 which were purchased in January 2009 and January 2010 for €295,000 and €305,000, respectively. Each has a predictable useful life of 70 years.
Dobtex also owns a number of smaller telescopes bought over the past 12 years for a total cost of €110,000. This equipment is currently valued at €65,000. The company also owns quoted investments valued at €45,000 and has liabilities totalling €130,000. The company has no other fixed assets or liabilities.
Brendan has decided to sell his shares in Dobtex and has been actively seeking a buyer in recent months. He has just been offered €785,000 by a French company for his entire shareholding which he has agreed to proceed with; he is therefore aiming to complete this disposal by the end of this year.

Requirements
Peter asks you to draft a report addressing the issues outlined below, based on the discussions at the meeting. Clearly state any assumptions made and assume that the tax rules up to Finance Act 2019 continue to apply to any future transactions.

1. Examine if Brendan can avail of any tax relief(s) on the sale of his shares in Dobtex Ltd and advise Brendan of the tax compliance payment and filing obligations which arise in relation to this transaction. Support your analysis with calculations.


2. Set out, with supporting calculations, the Irish Capital Gains Tax, Capital Acquisitions Tax and Stamp Duty consequences of the two options being considered for making a gift to Lucas. Recommend the best option to minimise the Irish tax liability.


3. Calculate the Capital Gains Tax liability, if any, which arises on the disposal of the Pluto plc shares in January 2021 and explain Brendan’s tax compliance obligations on the disposal. Prepare a share history, for tax purposes, of Brendan’s transactions in the Pluto plc shares.


4. Explain, with supporting calculations, the Stamp Duty implications and related compliance obligations in respect of Brendan’s commercial property acquisition.

 

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  • Posted on : May 14th, 2019
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