asked the Minister for Finance if he will ensure that a farmer, who purchased or received land as a gift in the past and subsequently borrowed money to pay and/or improve it, and is now in financial difficulties and is forced to sell all or part of the aforementioned lands, will be exempt from capital gains tax on the sale of these lands provided money received for same or part thereof will be used to meet his financial commitments already incurred on these lands.
Written Answers. - Land Sale Tax.
145.
Expenditure incurred by a farmer on the acquisition of land and expenditure incurred by him for the purpose of enhancing the value of the land, whether or not such expenditures are financed from borrowed moneys, are allowable as deductions from the proceeds of sale of the land in calculating, for capital gains tax purposes, any gain arising on the disposal of the land. If the land is not development land, the deductions mentioned are increased by reference to the consumer price index to take account of inflation. Furthermore if the aggregate of the sum originally paid (market value in the case of a gift) and the amount expended on improving the land exceeds the sale proceeds, the excess can be set against other gains of the year in question or carried forward indefinitely for set off against any future gains of the vendor. It will, therefore, be apparent that any amounts received on disposal of the land which can in effect be regarded as having been generated by the expenditure of borrowed moneys on the purchase or improvement of that land are not within the ambit of capital gains tax. Accordingly, the element in the sale proceeds represented by such borrowings is not diminished by capital gains tax and is available in full to extinguish borrowings.