Background
Daniel Doolan contracted on 22 December 2015 to sell a Kilcock, County Kildare property for €125,000, having acquired it in 2002 for €500,000. He sought to use the resulting €375,000 loss against a €296,450 gain on shares disposed of in the 2015 tax year, for which Revenue assessed capital gains tax of €81,074.
Ordinarily, a land disposal is deemed to occur on the contract date under s.542(1)(a) of the Taxes Consolidation Act 1997. But the agreement allowed the purchaser, until at least 30 June 2016, to withdraw if dissatisfied with title, planning, lease or other matters concerning the property. The Tax Appeals Commissioner held that the agreement was conditional under s.542(1)(b), so that the disposal occurred in 2017, when the condition was satisfied.
The Court’s Holding
Ms Justice Stack dismissed the appeal and answered “No” to all four questions in the case stated. Applying the Supreme Court’s interpretation in Flaherty v Revenue Commissioners [2026] IESC 4, the Court held that s.542(1)(b) applies where the parties have a contract but the principal obligation to dispose of or acquire the asset does not arise until a specified event occurs.
The purchaser’s exceptionally broad discretion to withdraw meant that the purchaser was not substantively bound to buy until satisfied with the matters identified in the special conditions. The agreement was therefore, in substance, an option to purchase and hence a conditional contract for s.542(1)(b). As the condition was not satisfied until 2017, the loss did not arise in 2015 and could not be set against the appellant’s 2015 share gain.
Key Takeaways
- A contract can be “conditional” for s.542(1)(b) even if it is described as a sale contract rather than an option.
- The question is whether the principal obligation to sell or buy is contingent on a later event.
- A broadly framed purchaser-satisfaction clause may make the agreement substantively an option and defer the CGT disposal date.
Why It Matters
The decision confirms the practical reach of Flaherty in CGT timing disputes. For tax purposes, the date a contract is signed will not govern where its terms leave a purchaser free to decide later whether to proceed.
Parties seeking to rely on losses in a particular tax year must examine conditionality clauses closely. A deferred disposal date may prevent a loss from being offset against gains realised in the earlier year.