The Federal Supreme Court (STF) has acknowledged the general repercussion of the legal-constitutional issue under Extraordinary Appeal No. 1.439.539, recognizing its legal, economic, and social relevance. The case will define whether Personal Income Tax (IRPF) may be levied on capital gains derived from the inter vivos transfer of estate assets—that is, donations made by the estate holder to compulsory heirs as an advance of inheritance (advancement of inheritance).
Background of the Dispute
The controversy stems from a common practice in estate planning, whereby the estate holder transfers assets or equity interests to heirs during their lifetime, often while retaining usufruct rights.
While such transfers are already subject to ITCMD (the state tax on inheritance and donations), the Federal Revenue Service has begun requiring IRPF payments in certain cases, based on capital gains calculated as the difference between the asset’s acquisition cost and its market value at the time of donation.
Conflicting Jurisprudence
There is currently a divergence between STF panels:
- In October 2023, the First Panel ruled that IRPF is not applicable, reasoning that the donation does not result in a patrimonial gain for the donor.
- Conversely, in March 2024, the Second Panel held that the tax is due, as the donation of an appreciated asset constitutes a taxable event.
Extraordinary Appeal No. 1.439.539 aims to harmonize this jurisprudential conflict.
Core Arguments at Stake
- Federal Treasury (PGFN) Position: IRPF should apply because the donor realizes capital gain by transferring the asset at a value greater than its acquisition cost, regardless of the absence of consideration.
- Taxpayer Position: No taxable income arises, as the donation represents a reduction in the donor’s patrimony and is already taxed under the ITCMD; there is no “income” or “proceeds” as defined by tax law.
Practical Implications
Should the STF hold that IRPF is not applicable in such cases, the decision would provide greater legal certainty for estate and succession planning, potentially avoiding tax assessments and double taxation scenarios.
However, if the Court affirms the tax’s applicability, taxpayers will need to:
- Reassess estate planning strategies, particularly regarding the donation of real estate and corporate quotas;
- Evaluate the financial impact of capital gains taxation at the time of donation.
Recommendations Pending Final Judgment
Until a final decision is rendered, it is advisable to:
- Exercise caution in estate plans involving the donation of significantly appreciated assets;
- Maintain detailed accounting and tax records regarding acquisition costs;
- Monitor the progress of the case with guidance from specialized legal counsel.
For further clarification or tailored advice on this matter, our legal team remains at your disposal.