CGT question with regard to purchase and sale of houses.

C

car

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Ive kept figures simple for maths.

Purchased house 1992 with partner at the time : mortgage now 50k
bought partner out 1998 , increased mortgage to do this. mortgage now 100k

2003 married. property still in my name only.

2006 leveraged equity. bought elsewhere and moved - old house now investment property- wifes name went on the mortgage deeds : mortgage now 200k

plan to sell in 2015 if value reaches parity with the mortgage.

Assuming house sells for value of mortgage at time of sale, is there any CGT liability there?
 
OK first thing's first, forget about mortgages, as they have nothing to do with the CGT liability - all a mortgage is, is the source of some or all of the purchase price.

From what you say you acquired your interest in the property in two stages, the first in 1992 at half the cost of the property, including your share of stamp duty & legal etc (mortgage amount irrelevant). You can apply indexation to this amount as per the table in the CGT1 information leaflet.

You then acquire the other half of the property in 1998, at whatever the cost to you at that time was, plus any further stamp duty & legal... (mortgage amount again irrelevant). You can apply indexation to this amount as per the table in the CGT1 information leaflet.

The sum of these two indexed amounts is the base cost of the property for CGT. Since it is now owned jointly with your wife, you each take half this amount (she is deemed to have owned it for the same period as you).

The disposal proceeds (less any legal / auctioneers fees on selling), are also split between you.

The difference between the base cost and the disposal is the gain.

You are both entitled to PPR relief on this gain to the tune of the proportion of time that you lived in the house as your PPR, plus 12 months, as a fraction of the total period of ownership - so if you bought in 1 January 2003 and moved out and it became a rental property in December 2006, and you sell on 31 December 2015, then that would be 15 years (180 months) + 12 months = 192 months / 288 months (24 years). So 67% of the gain would be exempt.
 
mandelbrot said:
OK first thing's first, forget about mortgages, as they have nothing to do with the CGT liability - all a mortgage is, is the source of some or all of the purchase price.

You then acquire the other half of the property in 1998, at whatever the cost to you at that time was, plus any further stamp duty & legal...
Click to expand...

Not the agreed cost, but 50% of the open market value of the property at the transfer date in 1998, surely?
 
T McGibney said:
Not the agreed cost, but 50% of the open market value of the property at the transfer date in 1998, surely?
Click to expand...

Sorry yes, the value at that time if the price wasn't an arms length transaction, but since the two people involved were strangers in blood then they weren't connected persons per the legislation, so you'd be inclined to go wit what was agreed at the time unless it is manifestly wrong.
 
mandelbrot said:
Sorry yes, the value at that time if the price wasn't an arms length transaction, but since the two people involved were strangers in blood then they weren't connected persons per the legislation, so you'd be inclined to go wit what was agreed at the time unless it is manifestly wrong.
Click to expand...

As an advisor, I'd be inclined to default to the presumption that where a transfer is between intimate partners it is by definition not an arms length transaction, but each one to their own :)
 
I would go with market value but in my experience the 1/2 share is valued at 1/2 the market value anyway then half the outstanding value mortgage is deducted and the departing partner gets the difference when that was positive in the good old days.

I've not seen cases where the departing partner is in the habit of deferring a gift on the remaining one.

So it's 1/2 the original cost + 1/2 the market value in the date of transfer. If this is substantially different from the consideration then there is probably a gift being 1/2 the mortgage + consideration paid vs. 1/2 market value.
 
I'll try to plug some figures into that then, not withstanding the euro changeover, and again keeping maths and dates simple and all expenses notwithstanding.

1st jan 1992 - original price of house 60k - I had half share
1st jan 1998 - I bought other share - market value = 120k
1st jan 2006 - wifes name went on deeds - market value 250k - Property transferred from PPR to rental property
1st jan 2015 plan to sell - assume property value = 250k.


So I had house for 23 years. 8 years estimated for investment

250-60= 190k profit =
8/23 = 66% CGT
64k assessed for CGT which is at 33% (I think) equalling about 21k minus allowances and expenses incurred along the way.

Is that about right? thanks for help.

Edit: Just wondering is there some pro-rata calculation on the higher value of the second half of the share I purchased in 1998?
 
I bought a property in 1997 for 145k. I have decided to sell it - current value is 545k.

Could you please tell me what my CGT liability is?

Thank You
 
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