Buying house from boyfriend's family - Gift tax

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Lemons

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I'm buying a house from my boyfriend's mum - but she is giving a third of the house to him so we are paying two thirds of the value. Do I have to pay gift tax? Is there any way that the gift is just to him so I don't have to pay?
 
Can't help unless you post figures.
Plus are you getting a mortgage? In joint names or sole names?
And are you first time buyers? ( Stamp duty is an issue as well)

mf
 
The house is worth 460k and we're paying 306k. We are getting a mortgage for 306k - I assume in joint names but I could probably get the mortgage on my own if it helped. We are first time buyers.

Thanks for reply!!
 
Boyfriend won't pay any tax if he buys the house in his sole name. But he may not be able to get a mortgage. Plus it leaves you vulnerable.

If you buy in joint names, you will essentally be taking a gift of about 77K from his mother and will pay CAT @ 25% on the balance over 21.7K so c. 14k in tax.

Its still a good deal because of the gift aspect.

Bank may or may not lend you more than 90% of the disclosed sale price.

mf
 
There may be Capital Gains Tax issues for the parents, if there is the selling price for tax purposes will be the market value.
 
An accountant told me I wouldn't be liable for gift tax if the gift is just given directly to my boyfriend. I've heard a few conflicting opinions on this now!
 
I don't think there's any CGT because the value of the house has fallen since the parents inherited it themselves
 
Is the house really worth €460k? With the current climate when people are looking for a quick sale they reduce the asking price.

If you BF's parents were selling the house on the open market at a value of €460k and Joe Murphy cames along and offers €400k and the parents accept are they giving €60k gift to Mr Murphy or just selling house at what market is prepaired to pay?
 
hhmmm that's a good question.....the house was on the market and there wasn't exactly queues of people handing over the cash....if we make an offer of €306k that the family are willing to accept, who's to argue?
 
Lemons said:
I don't think there's any CGT because the value of the house has fallen since the parents inherited it themselves
Click to expand...

If it has fallen below the indexed value (inflation adjusted) when the parents adjusted it then you may be right, if the value has simply fallen by a cetain amount that doesn't matter. If the house isn't your boyfriends parents principal private residence (more or less the house they live in all the time) they will pay Capital Gains Tax on the deemed market value (they can sell it to your boyfriend for any amount but for revenue purposes the market value will be used) less the original value indexed.
I'll use these numbers as an example.
House inherited in 1986 at 200,000
Market value now 460,000. Parents gift the house at 360,000.
The 200,000 is multiplied by an index factor to take into account inflation, I'll use 1.5, so we get 300,000. Take this from the market value and you get 160,000 at whatever the tax rate is. If it's the house his parents live in then they pay no capital gains tax if it's a second home they will.
For gift tax there are certain amounts that can be transferred tax free to a child with no tax implications, any portion of the house gifted to you will be taxed.
This is what i remember from doing tax ages ago so it's worth getting as much info (especially about the house in question) as possible and thinking of a couple different scenarios and go to an accountant.
 
Just looking at your figures and the parents inherited it about 5 years ago when the value was €460k and the value now is 460k. So using your calculations I don't think there should be CGT (it is a second home). I just wonder if the third of the house can be gifted to my boyfriend alone - and then the two of us buy the other two thirds together. Technically then he would own two thirds, and I would own one (which I don't mind). I seem to be getting different opionions from two solicitors and one accountant so don't know what to do!
 
Looking at the revenue website your boyfriend can get 434,000 worth of gifts from his parents (think that is a lifetime limit) tax free. So your boyfriend gets the gift tax free. It's valuing the remaining two thirds that looks tricky. Above you said you would get it for 306,000 (i think you said that you are paying that for the two thirds remaining). That looks like a straight forward transaction with no impilcations.
Also, I think a third party can receive a gift of 23,700 from a stranger tax free (life time limit also), see if they will gift you a portion of the house that works out to that amount which may be able to reduce your purchase price. If you have any friends studying tax at a high level in accounting exams you could ask them (just as a guideline and for potential questions for your accountant), this is the kind of thing that gets asked in questions. Like I said, look at various scenarios and ask around for a good accountant and go see them. i never worked in a tax environemnt and i don't want to mess up a big decision, have a trawl through the revenue website aswell.
 
Banks are also sometimes a bit iffy on these type things too as they want to ensure that whatever has been agreed between the parties isn't to their detriment.

Let us know how you get on here.

When looking for an accountant - and whatever you do, get advice from someone thats qualified i.e. not a student - ensure that whether they're ACCA or ACA that they have the AITI tax qualification letters.
 
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