New court ruling orders heirs in Brazil to pay income tax on gains from sale of real estate

RIO DE JANEIRO, BRAZIL – A Uruguayan family that inherited a property of more than 2,000 hectares in Santana do Livramento (Rio Grande do Sul state) and sells the property will have to pay income tax (IR) on the capital gain and not on the partial sales values, as requested in court.

The 4th Regional Federal Court of Appeals, based in Porto Alegre, granted an appeal by the federal government, rejecting an injunction obtained by the heirs in the lower court.

The heirs filed the lawsuit early last year. They sought a court order that the IRS not impose income tax on capital gains realized from the sale. They argued that the incidence of the tax should fall on the sale values, far below that reached in the assessment for the sale of real estate.

By unanimously accepting the government’s appeal, the 2nd Chamber of TRF-4 reversed the decision of the 3rd Federal District Court of Santa Maria (RS), which was favorable to the heirs.

According to the reporter of the case, Federal Judge Romulo Pizzolatti, “it makes one wonder why the plaintiffs claim to pay nothing, absolutely nothing, as capital gains, considering that half of the property was worth R$495,796.00 in 1995 and the other half, R$2,100,00.00 in 2010, and was sold by the heirs in 2018 for R$14,250,000.00.

Source: Valor