DGT confirms that capital losses are not inheritable

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the tax treatment of capital losses pending offset following the death of a taxpayer. The inquiry addressed whether heirs have the right to include in their own taxable base the negative balance that the deceased held in their Personal Income Tax (IRPF) return.

What the DGT has ruled

The administration has determined that uncompensated capital losses belong exclusively to the taxpayer who generated them. According to the DGT's criteria, these losses are not subject to transfer, which implies that there is no transmissible right mortis causa that can form part of the estate. Consequently, the regulations of the Personal Income Tax Law (LIRPF) prevent heirs from using said losses to offset their own income or capital gains.

What this means for you

This ruling has a direct impact on individuals receiving an inheritance. If the deceased had a negative balance derived from the sale of assets or investments, that tax benefit is lost upon their death. Heirs must understand that:

• Losses are not integrated into the inherited estate.
• There is no possibility of reducing the heirs' IRPB taxable base through the deceased's negative balance.
• The nature of the loss is personal and non-transferable.

What should be done

In this situation, it is necessary to perform a detailed analysis of the deceased's tax situation before the transfer of assets. It is fundamental to distinguish between the assets that form part of the inheritance and the personal tax rights that expire upon death. Given that the regulations are strict on this point, it is recommended to assess the particular situation of each succession to understand the real tax impact of the assets received and the absence of compensable negative balances.