PART II.

Income Tax in Relation to Administration of Estates.

8. —(1) For the purposes of this Part of this Act—

(a) a person shall be deemed to have an absolute interest in the residue of the estate of a deceased person, or in a part thereof, if and so long as the capital of the residue or of that part thereof (as the case may be) would, if the residue had been ascertained, be properly payable to him, or to another in his right, for his benefit, or is properly so payable, whether directly by the personal representatives or indirectly through a trustee or other person;

(b) a person shall be deemed to have a limited interest in the residue of the estate of a deceased person, or in a part thereof, during any period (other than a period during which he has an absolute interest in the residue or in that part thereof, as the case may be) where the income of the residue or of that part thereof (as the case may be) for that period would, if the residue had been ascertained at the commencement of that period, be properly payable to him, or to another in his right, for his benefit, whether directly or indirectly as aforesaid;

(c) real estate included (either by a specific or a general description) in a residuary gift made by the will of a testator shall be deemed to be a part of the residue of his estate and not to be the subject of a specific disposition.

(2) In this Part of this Act—

(a) the expression “personal representatives” means, in relation to the estate of a deceased person, his executors as defined by paragraph (d) of sub-section (1) of section 22 of the Finance Act, 1894, and includes persons having in relation to the deceased under the law of another country any functions corresponding to the functions for administration purposes under the law of Ireland of executors as so defined, and references to personal representatives as such shall be construed as references to the executors in their capacity as having such functions as aforesaid;

(b) the expression “specific disposition” means a specific devise or bequest made by a testator, and includes any disposition having, whether by virtue of any enactment or otherwise, under the law of Ireland' or of another country an effect similar to that of a specific devise or bequest under the law of Ireland;

(c) the expression “charges on residue” means, in relation to the estate of a deceased person, the following liabilities properly payable thereout and interest payable in respect of those liabilities, that is to say,—

(i) funeral, testamentary, and administration expenses and debts,

(ii) general legacies (including in the case of an intestacy the sum of five hundred pounds to which the widow of the intestate is entitled under the Intestates Estates Act, 1890), demonstrative legacies, and annuities, and

(iii) any other liabilities of his personal representatives as such,

but, in the case of any such liabilities which, as between persons interested under a specific disposition or in such a legacy as aforesaid or in an annuity and persons interested in the residue of the estate, fall exclusively or primarily upon the property that is the subject of the specific disposition or upon the legacy or annuity, includes only such part (if any) of those liabilities as fall ultimately upon the residue;

(d) references to the “aggregate income of the estate” of a deceased person for any year of assessment shall be construed as references to the aggregate income from all sources for that year of the personal representatives of the deceased as such, treated as consisting of—

(i) any such income which is chargeable to Irish income tax by deduction or otherwise, such income being computed at the amount on which that tax falls to be borne for that year, and

(ii) any such income which would have been so chargeable if it had arisen in Ireland to a person resident and ordinarily resident therein, such income being computed at the full amount thereof actually arising during that year, less such deductions as would have been allowable if it had been charged to Irish income tax, but excluding any income from property devolving on the personal representatives otherwise than as assets for payment of the debts of the deceased;

(e) the expressions “Irish estate” and “foreign estate” mean respectively, as regards any year of assessment—

(i) an estate the income whereof comprises only income which either has borne Irish income tax by deduction or in respect of which the personal representatives are directly assessable to Irish income tax, other than an estate any part of the income of which is income in respect of which the personal representatives are entitled to claim exemption from Irish income tax by reference to the fact that they are not resident or not ordinarily resident in Ireland, and

(ii) an estate other than an Irish estate;

(f) references to sums paid include references to assets that are transferred or that are appropriated by a personal representative to himself, and to debts that are set off or released;

(g) references to sums payable include references to assets as to which an obligation to transfer or a right of a personal representative to appropriate to himself is subsisting on the completion of the administration and to debts as to which an obligation to release or set off, or a right of a personal representative so to do in his own favour, is then subsisting;

(h) references to amount in relation to such assets as aforesaid shall be construed as references to the value thereof at the date on which they were transferred or appropriated, or at the completion of the administration, as the case may require, and, in relation to such debts, as references to the amount thereof.

(3) In a case in which different parts of the estate of a deceased person are the subjects respectively of different residuary dispositions, this Part of this Act shall have effect in relation to each of those parts, with the substitution for references to the estate of references to that part of the estate, and the substitution for references to the personal representatives of the deceased as such of references to the said personal representatives in their capacity as having the functions referred to in paragraph (a) of sub-section (2) of this section in relation to that part of the estate.

9. —(1) This Part of this Act—

(a) shall, in relation to amounts deemed by virtue of the next following section of this Act to have been paid as income, have effect for the purpose of assessment to income tax and to sur-tax for the year beginning on the 6th day of April, 1937, and every subsequent year and for the purpose of reliefs for that year and every such subsequent year, and

(b) shall, in relation to amounts deemed by virtue of the second following section of this Act to have been paid as income, have effect for the purpose of assessment to income tax and to sur-tax for the year beginning on the 6th day of April, 1938, and every subsequent year and for the purpose of reliefs for that year and every such subsequent year, and

(c) shall apply in relation to the estate of a deceased person whether he died before or after the commencement of the year beginning on the 6th day of April, 1937, or the year beginning on the 6th day of April, 1938, as the case may be.

(2) Section 30 (which relates to cases in which a charity is entitled to a residue) of the Finance Act, 1922, shall not apply to income for the year beginning on the 6th day of April, 1938, or any subsequent year.

(3) Any relief given to any person before the passing of this Act in respect of any income in respect of which that person is entitled to relief by virtue of this Part of this Act shall be taken as having been given on account of the relief to which he is so entitled.

10. —(1) The following provisions of this section shall have effect in relation to a person who, during the period commencing on the death of a deceased person and ending on the completion of the administration of the estate of such deceased person (in this Part of this Act referred to as “the administration period”) or during a part of that period, has a limited interest in the residue of the said estate or in a part thereof.

(2) When any sum has been paid during the administration period in respect of that limited interest the amount thereof shall, subject to the provisions of the next following sub-section of this section, be deemed for all the purposes of the Income Tax Acts to have been paid to that person as income for the year of assessment in which that sum was paid, or, in the case of a sum paid in respect of an interest that has ceased, for the last year of assessment in which it was subsisting.

(3) On the completion of the administration of the estate—

(a) the aggregate amount of all sums paid before, or payable on, the completion of the administration in respect of that limited interest shall be deemed to have accrued due to that person from day to day during the administration period or the part thereof during which he had that interest (as the case may be) and to have been paid to him as it accrued due;

(b) the amount deemed to have been paid to that person by virtue of the foregoing paragraph of this sub-section in any year of assessment shall be deemed for all the purposes of the Income Tax Acts to have been paid to him as income for that year; and

(c) where the amount which is deemed to have been paid to that person as income for any year by virtue of this sub-section is less or greater than the amount deemed to have been paid to him as income for that year by virtue of the next preceding sub-section of this section, such adjustments shall be made as are hereafter provided in this Part of this Act.

(4) Any amount which is deemed to have been paid to that person as income for any year by virtue of this section shall—

(a) in the case of an Irish estate be deemed to be income of such an amount as would after deduction of income tax at the standard rate of tax for that year be equal to the amount deemed to have been so paid, and to be income that has borne income tax at the standard rate of tax;

(b) in the case of a foreign estate, be deemed to be income of the amount deemed to have been so paid, and shall be chargeable to income tax under Case III of Schedule D of the Income Tax Act, 1918, as if it were income arising from securities in a place out of Ireland.

(5) Where a person has been charged to income tax for any year by virtue of this section in respect of an amount deemed to have been paid to him as income in respect of an interest in a foreign estate and any part of the aggregate income of that estate for that year has borne Irish income tax by deduction or otherwise, the income in respect of which he has been so charged to tax shall, on proof of the facts to the satisfaction of the Special Commissioners, be reduced by an amount bearing the same proportion thereto as the amount of the said income which has borne Irish income tax bears to the amount of the said aggregate income:

Provided that where relief has been so given, such part of the amount in respect of which he has been charged to income tax as corresponds to the said proportion shall, for the purposes of sur-tax, be deemed to represent income of such an amount as would after deduction of income tax at the standard rate of tax be equal to that part of the amount charged.

11. —(1) The following provisions of this section shall have effect in relation to a person who, during the administration period or during a part of that period, has an absolute interest in the residue of the estate of a deceased person or in a part thereof.

(2) There shall be ascertained in accordance with the next succeeding section the amount of the residuary income of the estate for each whole year of assessment, and for each broken part of a year of assessment, during which—

(a) the administration period was current, and

(b) that person had that interest,

and the amount so ascertained in respect of any year or part of a year or, in the case of a person having an absolute interest in a part of a residue, a proportionate part of that amount, is in this Part of this Act referred to as the “residuary income” of that person for that year of assessment.

(3) When any sum or sums has or have been paid during the administration period in respect of that absolute interest, the amount of that sum or the aggregate amount of those sums shall, subject to the provisions of the next following sub-section of this section be deemed for all the purposes of the Income Tax Acts to have been paid to that person as income to the extent to which, and for the year or years of assessment for which, he would have been treated for those purposes as having received income if he had had a right to receive in each year of assessment—

(a) in the case of an Irish estate, his residuary income for that year less income tax for that year, at the standard rate of tax, or

(b) in the case of a foreign estate, his residuary income for that year,

and that sum or the aggregate of those sums had been available for application primarily in or towards satisfaction of those rights as they accrued and had been so applied.

In the case of an Irish estate, any amount which is deemed to have been paid to that person as income for any year by virtue of this sub-section shall be deemed to be income of such an amount as would after, deduction of income tax at the standard rate of tax for that year be equal to the amount deemed to have been so paid, and to be income which has borne income tax at the standard rate of tax.

(4) On the completion of the administration of the estate—

(a) the amount of the residuary income of that person for any year of assessment shall be deemed for all the purposes of the Income Tax Acts to have been paid to him as income for that year, and in the case of an Irish estate shall be deemed to have borne tax by reference to the standard rate of tax; and

(b) where the amount which is deemed to have been paid to that person as income for any year by virtue of this sub-section is less or greater than the amount deemed to have been paid to him as income for that year by virtue of the next preceding sub-section of this section, such adjustments shall be made as are hereafter provided in this Part of this Act.

(5) In the case of a foreign estate, any amount which is deemed to have been paid to that person as income for any year by virtue of this section shall be deemed to be income of that amount, and shall be chargeable to income tax under Case III of Schedule D of the Income Tax Act, 1918, as if it were income arising from securities in a place out of Ireland.

(6) Where a person has been charged to income tax by virtue of this section in the circumstances mentioned in sub-section (5) of the next preceding section of this Part of this Act, the provisions of that sub-section shall have effect as they have effect where a person has been charged to income tax by virtue of that section in those circumstances.

12. —(1) The amount of the residuary income of an estate for any year of assessment shall be ascertained by deducting from the aggregate income of the estate for that year—

(a) the amount of any annual interest, annuity, or other annual payment for that year which is a charge on residue and the amount of any payment made in that year in respect of any such expenses incurred by the personal representatives as such in the management of the assets of the estate as, in the absence of any express provision in a will, would be properly chargeable to income, but excluding any such interest, annuity, or payment allowed or allowable in computing the aggregate income of the estate; and

(b) the amount of any of the aggregate income of the estate for that year to which a person has on or after assent become entitled by virtue of a specific disposition either for a vested interest during the administration period or for a vested or contingent interest on the completion of the administration.

(2) In the event of its appearing, on the completion of the administration of an estate in the residue of which, or in a part of the residue of which, a person had an absolute interest at the completion of the administration, that the aggregate of the benefits received in respect of that interest does not amount to as much as the aggregate for all years of the residuary income of the person having that interest, his residuary income for each year shall be reduced for the purpose of the next preceding section of this Part of this Act by an amount bearing the same proportion thereto as the deficiency bears to the aggregate for all years of his residuary income.

In this sub-section the expression “benefits received” in respect of an absolute interest means the following amounts in respect of all sums paid before, or payable on, the completion of the administration in respect of that interest, that is to say:—

(a) as regards a sum paid before the completion of the administration, in the case of an Irish estate such an amount as would, after deduction of income tax at the standard rate of tax for the year of assessment in which that sum was paid, be equal to that sum or, in the case of a foreign estate, the amount of that sum, and

(b) as regards a sum payable on the completion of the administration, in the case of an Irish estate such an amount as would, after deduction of income tax at the standard rate of tax for the year of assessment in which the administration is completed, be equal to that sum or, in the case of a foreign estate, the amount of that sum.

(3) In the application of the next preceding sub-section of this section to a residue or a part of a residue in which a person other than the person having an absolute interest at the completion of the administration had an absolute interest at any time during the administration period, the aggregates therein mentioned shall be computed in relation to those interests taken together, and the residuary income of that other person also shall be subject to reduction thereunder.

13. —(1) Where the personal representatives of a deceased person have as such a right in relation to the estate of another deceased person such that, if that right were vested in them for their own benefit, they would have an absolute or a limited interest in the residue of that estate or in a part thereof, they shall be deemed to have that interest notwithstanding that that right is not vested in them for their own benefit, and any amount deemed to be paid to them as income by virtue of this Part of this Act shall be treated as part of the aggregate income of the estate of the person whose personal representatives they are.

(2) Where different persons have successively during the administration period absolute interests in the residue of the estate of a deceased person or in a part thereof, sums paid during that period in respect of the residue or of that part thereof, as the case may be, shall be treated for the purpose of this Part of this Act as having been paid in respect of the interest of the person who first had an absolute interest therein up to the amount of—

(a) in the case of an Irish estate, the aggregate for all years of that person's residuary income less income tax at the standard rate of tax, or

(b) in the case of a foreign estate, the aggregate for all years of that person's residuary income,

and, as to any balance up to a corresponding amount, in respect of the interest of the person who next had an absolute interest therein, and so on.

(3) Where upon the exercise of a discretion any of the income of the residue of the estate of a deceased person for any period (being the administration period or a part thereof) would, if the residue had been ascertained at the commencement of that period, be properly payable to any person, or to another in his right, for his benefit, whether directly by the personal representatives or indirectly through a trustee or other person, the amount of any sum paid pursuant to an exercise of the discretion in favour of that person shall be deemed for all the purposes of the Income Tax Acts to have been paid to that person as income for the year of assessment in which it was paid, and the provisions of sub-sections (4) and (5) of the third section in this Part of this Act shall have effect in relation to an amount which is deemed to have been paid as income by virtue of this sub-section.

14. —(1) Where, on the completion of the administration of an estate, any amount is deemed by virtue of this Part of this Act to have been paid to any person as income for any year of assessment and either—

(a) that amount is greater than the amount that has previously been deemed to have been paid to him as income for that year by virtue of this Part of this Act, or

(b) no amount has previously been so deemed to have been paid to him as income for that year,

an assessment or additional assessment may be made upon him for that year and tax charged accordingly or, on a claim being made for the purpose, any relief or additional relief to which he may be entitled shall be allowed accordingly.

(2) Where, on the completion of the administration of an estate, any amount is deemed by virtue of this Part of this Act to have been paid to any person as income for any year of assessment, and that amount is less than the amount that has previously been so deemed to have been paid to him, then—

(a) if an assessment has already been made upon him for that year, such adjustments shall be made in that assessment as may be necessary for the purpose of giving effect to the provisions of this Part of this Act which take effect on the completion of the administration, and any tax overpaid shall be repaid, and

(b) if—

(i) any relief has been allowed to him by reference to the amount which has been previously deemed as aforesaid to have been paid to him as income for that year, and

(ii) the amount of that relief exceeds the amount of relief which could have been given by reference to the amount which, on the completion of the administration, is deemed to have been paid to him as income for that year,

the relief so given in excess may, if not otherwise made good, be charged under Case VI of Schedule D of the Income Tax Act, 1918, and recovered from that person accordingly.

(3) Notwithstanding anything contained in the Income Tax Acts, the time within which an assessment or additional assessment may be made for the purposes of this Part of this Act, or an assessment may be adjusted for those purposes, or a claim for relief may be made by virtue of this Part of this Act, shall not expire before the end of the third year following the year of assessment in which the administration of the estate in question was completed.

(4) The Revenue Commissioners may by notice in writing require any person being or having been a personal representative of a deceased person, or having or having had an absolute or a limited interest in the residue of the estate of a deceased person or in a part thereof, to furnish them (within such time as they may direct, not being less than twenty-eight days) with such particulars as they think necessary for the purposes of this Part of this Act, and if that person without reasonable excuse fails to comply with the notice he shall be liable to a penalty not exceeding fifty pounds, and, after judgment has been given for that penalty, to a further penalty of the like amount for each day during which that failure continues.