Gift Tax Exemption for Dwelling House - part ownership?

Hi,

I'm wondering if anyone can help me with a question re gift tax relief for a dwelling house. My parents are looking to buy a house for me and my partner which they will own for 3 years and then gift to us without tax under Tax Exemption cat-10.

We would like to add to take out a loan from the bank to add additional funds to the house so we can buy a better place.

Has anyone heard of joint ownership in this manner and would they still be able to gift us their share without being taxed?

many thanks for your help.

Your parents have to own the house fully. You could, however, borrow the money from the bank and gift it to your parents ( I think the same225,000 threshold applies). This would allow them to buy the house of your choice.

interesting

thanks for the reply. Would the bank loan us to give a gift to my parents?

What level of Loan were you thinking about? If its relatively small 20-30k you may get it unsecured. If its larger then perhaps your parents could guarantee the loan, then when you own the house in 3 years time you could then secure the loan on the house. ( it will be a relatively small % of the total house value i guess. Also, I am assuming that if you are looking at this overall route to avoid CAT ( and the dwelling house relief is an excellent way) then you may also be expecting to use up the 225,000 parent Child limit by further gifts....therefore your Parents will have the capacity to guarantee.. I think this sort of overall gift /inheritance planning is brilliant and a lot more Parents/ Children shoulsd openly discuss these issues ( if they have such issues). I certainly have with my children.

Yes they're looking to sell the family home in the country and buy a house for me in the city without paying cat.

We were looking at quite a big loan. loaning 150-200k, and they paying the rest on a 550k house. They live in an expensive area and part of the deal would be to live close to them.

yes i just talked to the bank and they said max is 65k for two people sharing on unsecured loan and that's with a lot of criteria to fulfil. Otherwise my parents could be joint signees on the loan against the bought property.

But i wonder if there's a loan against the property would this bring up any issues when they sign if over to me in three years time? Also they probably aren't looking to get into another mortgage situation at their age.

Mizen Head said:

Your parents have to own the house fully. You could, however, borrow the money from the bank and gift it to your parents ( I think the same225,000 threshold applies). This would allow them to buy the house of your choice.

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Are you sure that the threshold child to parent is €225,000?

No, Joe. I am not sure. ( thats why, I qualified it with 'I think' ) But I just looked this up on Revenue site. . Maybe a gift is different from an inheritance.

- Section 79, Capital Acquisitions Tax Consolidation Act 2003.

If a parent takes an absolute inheritance from a child, that parent has a Group A threshold.

I think we will have to disagree.

Yes, an inheritance, not a gift.

On a gift from child to parent the Class B threshold applies.

Instead of gifting the money to your parents perhaps you could buy something from them - e.g. an interest in the house they currently live in. They then buy a new house and gift that to you. Eventually you inherit the portion of your parents' house that you don't already own.

I've no idea if this is feasible but it could be worth looking at.

abacab said:

Instead of gifting the money to your parents perhaps you could buy something from them - e.g. an interest in the house they currently live in. They then buy a new house and gift that to you. Eventually you inherit the portion of your parents' house that you don't already own.

I've no idea if this is feasible but it could be worth looking at.

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Interesting but the house that the OP lives in then would not qualify for the dwelling house exemption because they would own another dwelling house.

The OP should seek professional advice.

In the interest of clarity perhaps @Mizen Head could give a reference for

Your parents have to own it fully

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Hi Joe...No idea where to find a reference ! .I think its more about kicking my a.., rather than clarity. I was only trying to help. But I will leave it to the experts in future!!

Perhaps yet another approach is to structure the child to parent cash transfer as a loan (rather than as a gift or purchase). This then becomes a debt of the parents settled in probate/on inheritance. A possible further advantage is that the assets transferred in probate for this settlement could then avoid CAT, as they are a loan repayment and not a gift/inheritance.

Mizen Head said:

Hi Joe...No idea where to find a reference ! .I think its more about kicking my a.., rather than clarity. I was only trying to help. But I will leave it to the experts in future!!

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It's not about kicking anyone. You made a statement that the house had to be owned by the parent - was this a guess or do you have any basis for this statement. It has framed the discussion and all I was trying to do was check if it was correct.