CGT and being resident in a gifted house

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paddi22

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My dad has two houses and is doing up his will now. he is hoping that they eventually are split - one each between me and my sibling. The house he is hoping to give me is one I could move into at any time.

He mentioned it would make more sense for me to move into it now and said something about CGT not being applied if someone is resident in a house for a certain number of years.

His grasp of tax can be hazy so could anyone explain if this is the case, and how many years would apply if so? I have tried to source it on the the revenue website but its not clear
thanks.
 
Your Dad has a point that CAT does not apply in certain circumstances, if you
inherit a house that you live in. However, your case would not apply for this exemptions.

Here is the relevant quote.

http://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_acquisitions_tax.html

"A gift or inheritance of a house which has been your main residence may be exempt from Capital Acquisitions Tax if you do not own or have an interest in any other house.
You must have lived in the house as your main residence for the three years immediately preceding the date of the gift or inheritance. However, in the case of gifts taken on or after 20 February 2007, time you lived in the house will not be counted if it was also the disponer's only or main residence, unless, the disponer was dependent on your care because of old age or illness. Also the house must be owned by the disponer for three years if it is a gift taken on or after 20 February 2007."
 
Hi Paddi

Just to clarify

You can save CAT or gift tax. But this might not be an issue if the house and total inheritance is less than the threshold from father to daughter.

It makes no difference for Capital Gains Tax. If your father gifts you the property, it would be subject to CGT. If he leaves it to you on his death, there would be no CGT.

Brendan
 
Paddi - i am doing the same for my daughter
(not out of kindness but because rental income from this property may cost me over 50% tax but will almost tax-free for her as she's not earning anything else)


As Brendan says there may not be any CAT for you on this .( See the threshold limit on gifts/inheritance this evening. ). However, if you father dies soon whatever else you inherit may now mean inheritance taxes because you have used up much/most of your gift/inheitance allowance.


The problem is that your father will pay CGT as Brendan says. But as property has collapsed in price it may not be too high. I dont know what the level CGT will be -wait for Budget.

Anyway your Dad must pay the CGT on the amount that the property has increased in value since he bought it- minus any receipted costs of capital expenditure minus any indexation (up till 2004) minus an annual small allowance -

Anway ,here is an example (depending on when he bought it the index link multiplier will change -the older the house the greater the multiplier. You can multiply a 1980 value by 3.5 times. You must google Revenue's multiplier tables for property.

EXAMPLE
One buys house in 1990 - 50.000 euros (punt equivalent) -you can index-link this by 1.5 times = 75.000

House now worth 150.000. Gain = 75.000

Dad must pay CGT (25% maybe 30% -who knows today) on the 75.000 gain.
-he can deduct any capital expenditures (not painting but real improvements -an annex, new roof etc)
- plus he can knock of a couple of grand as his annual CGT allowance.

====================

On the other hand if he paid 200.000 for the house in 1999 its probably worth the same today -and there's no capital gain.

Essential you study Revenue websites as your Dad may end up paying a lot of CGT that he wasnt expecting.

I'm not an accountant so I tend to waffle unclearly. Perhaps an accountant can post any comments or corrections in what i've advised....?

P.S. Last bit of bad news.
When you sell the house you'll pay CGT if its not your home. Again, can anyone correct me on that last point?
 
oldnick said:
.

Essential you study Revenue websites as your Dad may end up paying a lot of CGT that he wasnt expecting.
Click to expand...

Good post all round, but given the scale and extent of possible tax liabilities here, I would suggest that the OP or their father should be getting specific professional advice on the tax implications of any transfer in advance of doing anything.
 
I would agree with TMcGibney about getting the help of an accountant. Although I don't know TMcGibney (or any Cavanman if I can help it) I must admire his website and generally his accounting/financial comments on this website.
 
thanks for the advice, that definitely helps clarify things.

am i right in thinking the best option would be for me to move into the house now (i will be caring for my father in this house, even though the other house my sibling will get is his main residence). then, would the best course be for him to leave my this house in his will?

thanks again for all the advice, its much appreciated
 
I should clarify my point, and BTW, I agree with all the posters above.

Your father owns two houses, house A which is his PPR and house B which is not.

He wants to will or gift you house B, and do this in a way that legally minimizes the tax bill for both of you.

If he disposes of house B, while he is alive, either by selling or gifting, he will be liable for CGT if the value has increased in the time that he has owned it.
If he wills this house to you, there will be no CGT liability whn he dies and you inherit, regardless of any increase in value.

If he gifts or wills the house to you, you are liable for Capital Acquisition Tax (CAT), unless the value of the gift is less than the threshold for parent to child gifts.

There are excemptions to this, in certain circumstances, if you live in the house for 3 years and gifts and inheritancesd are treated differently for these exemptions.
However, if you read the line I quoted above, it is more complex that I realised and I am not an Accountant, so best to get some expert advice.

In your last post, you said that you would be looking after your father in house B, but house A would be his PPR. Not sure what you mean. Which house is he currently living in ?
 
thanks for that, that helps make it clear!

To clarify the housing situation, as i hadn't made it clear - he currently lives in house A and has for all his life.

House B is a larger house down the country which they used a holiday home and then extended, it also has a field attached. House B suits me better as i keep horses. My father is elderly and incapacitated, and I am happy to care for him there. the house is a sizable bungalow which suits him better as he can no longer use stairs and the bathrooms can be modified for disabled use.

He is keen for us to move into the house but i was wary in case it cost him a lot of taxes etc. he is very wise with money and is keen to make it work as beneficially as possible taxwise.
 
Currently house A is your fathers PPR.
He has suggested that both of you move to house B and ultimately, he leaves it to you in his will. Your sibling will inherit house A.

As soon as he moves, house B becomes his PPR, and house A would be an investment property.

If you are resident in house A for 3 years and inherit it, you should be exempt from CAT.

Your sibling, who inherits house A will have to pay CAT, if the value of the inheritance is over the threshold for parent to child gifts.

What does he intend to do this house A, when he leaves it ?
 
thanks for responding.

He will leave house A vacant unless my sibling wants to move in, which they probably don't.

How do you prove residency for when we move there, are bills etc in our name enough? We will be obviously living there and changing all bills etc, but do they have guidlines you have to pass to claim residency?

Also how can we prove that we do care for our father there? Will it be an issue if he has the other house vacant do you think?
 
capital gains tax

Does capital gains tax apply to a property when in negative equity?
 
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