Will I be liable for capital gains tax in the future if I live in an investment property that was previously jointly owned by my ex-husband and I and if this property was transferred to me as part of my divorce settlement and became my primary residence once it was transferred and I relinquished all rights to the family home (which my ex-husband will live in)?SGFamily break-up makes for myriad complications, financial and otherwise. Just about the only guarantee is that no one will end up better off financially, whatever about emotionally.It can certainly seem a bit unfair that, with all the upheaval, people are also having to consider tax liabilities, but that can be the case. For most people, the bigger concern for one or other party is actually finding somewhere to live as they will own or rent just one property. That can be distressingly difficult in today’s property market, especially if children or work mean both parties need to try to find accommodation in the same area where they lived as a family.In some ways, you are fortunate. You and your husband had both the family home and this investment property.In the normal course of events, you might expect that your husband would have to pay tax on some of the capital gain in the value of the investment property from the time it was acquired until the time he signs it over to you entirely. Similarly, you might think that while you get this property as a family home in the future, you might be stuck with some capital gains tax liability for the period when it was an investment.However, the good news is that does not have to be the case – as long as you both follow fairly formal rules.A specific Revenue Commissioner provision is made for certain assets passing between a former couple on separation or divorce, but only if the transfer is on foot of a court order.If there is a likelihood of divorce or separation, you would be strongly advised to seek out specialist tax advice on this subject to ensure that any eventual court order is correctly worded so you would not be left with a capital gains tax bill on this property – and that the timing of any transfers meets the requirements of the legislation.For instance, if the assets were part of a business, the exemption might not apply. The last thing you want is to think that you have closed the door on the past with no loose ends only to find Revenue comes calling.[ Can we choose which of our two properties is exempt from capital gains tax?Opens in new window ]Under Section 1031 of the Taxes Consolidation Act 1997 and section 35 of the Family Law (Divorces) Act 1996, if “on or following the granting of a decree of divorce, either of the spouses concerned disposes of an asset to the other spouse, both spouses shall be treated for the purpose of those Acts as if the asset was acquired from the spouse making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the spouse making the disposal”.In simple terms, the change of ownership in the investment property from the two of you to you alone does not in itself trigger a charge to capital gains. This is an exception to the general rule under capital gains tax law where an owner transferring an asset is liable for capital gains tax on any increase in the value of the asset.At the same time, as your husband would continue to live in what was your family home as his main residence, neither of you would have any tax liability there.Both of you can move forward in your new independent lives without either of you having to worry about an immediate tax bill for a property that is now your home and he no longer owns.So far, so good. But what happens down the line if either of you sells these properties?This is where you really need to think things through before agreeing to such a division of property in any divorce settlement.For your now ex-husband living in what had always been the family home, there will be no capital gains tax bill as it is covered by the principal private residence exemption to capital gains.[ Will our daughter be stuck with a tax bill and no way to pay it under a right of residence?Opens in new window ]You, however, would be facing a capital gains tax bill. The capital gains exemption on divorce applies only for as long as you continue to reside in that property – or die there. Otherwise, the clock rewinds to the original purchase date when you and your ex-husband bought the property. And although he was joint-owner during the period when it was an investment property, it is you, not him, who would face the full capital gains tax bill.Revenue was kind enough to give me a worked example to explain how this would work. Clearly, you would need to adjust the timeline and the valuations to suit the particulars of your circumstances.Assume a residential investment property was jointly purchased by spouses 12 years before their divorce, for €250,000, plus €5,000 in purchase costs. Your ex-husband transfers his interest in the investment property to you pursuant to a court order under the Family Law (Divorce) Act 1996. From the date of the divorce, you occupy the property as your principal private residence.When the property is sold eight years later for, say, €400,000, after what will have been 20 years of ownership in total, it will have been occupied by you as your family home for 40 per cent of those years (i.e. eight of those 20 years). The gain on the sale is €145,000. As you occupied the property as your family home for eight of the 20 years of ownership, 40 per cent of the gain – €58,000 – is exempt from capital gains tax CGT. But you are liable for the balance of €87,000 of the overall gain.Allowing for the €1,270 annual personal capital gains tax exemption that we can all avail of, that would leave you with a taxable gain of €85,730. At the capital gains tax rate of 33 per cent, you would face a bill for €28,290.90.[ How do I work out capital gains on a jointly owned holiday home after partner’s death?Opens in new window ]Knowing that in advance might make you think twice about the fairness of the division of assets in any divorce settlement.Revenue does add a note of caution, as clearly, it has been given just the anonymised outline of your query. It stresses: “It is not possible to be definitive without having full details of the specific facts and circumstances of the case. The Capital Gains Tax consequences of these property disposals, and the availability of relief in such circumstances, are dependent on the specific facts and circumstances arising at the time of disposal.”Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice