Buying an apartment for a parent - any tax implications

Sophrosyne said:
If the relative has sufficient income to maintain themselves then the Dependent Relative Credit is unavailable.

According to s 466 the relative’s income cannot exceed the amount of the annual old age contributory pension at age 80 plus the Living Alone Allowance. For 2020 that amounts to €15,060.
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Well, that would appear to be the case with the parent in the OP's scenario.

So, are we saying that there would be no CAT implications with the proposed arrangement but the extension of the PPR exemption from CGT would not apply to the apartment?
 
@Sarenco, your post persuaded me to look this up.

The conditions for the dependent relative credit are contained in TCA 1997, s 466.

That section mentions the specified amount over which a relative’s income cannot exceed for a claimant to qualify for the credit.

However, the CAT and CGT legislation have their own definitions of dependent relative.

This appears deliberate otherwise they would both have referred back to the conditions in s 466, e.g., something like - dependent relative has the same meaning as s 466, or within the meaning of s 466. But they don’t.

For CGT, s 604 (11)(a) states:

“In this subsection, “dependent relative”, in relation to an individual, means a relative of the individual, or of the wife or husband of the individual, who is incapacitated by old age or infirmity from maintaining himself or herself, or the widowed father or widowed mother (whether or not he or she is so incapacitated) of the individual or of the wife or husband of the individual.

And for CAT s 86 (as amended) s 9(a)

In this subsection—
‘dependent relative’ means a relative who is—
(i) permanently and totally incapacitated by reason of mental or physical infirmity from maintaining himself or herself, or
(ii) of the age of 65 years or over.

There is no mention of an income limit in either case.

But what, therefore, does “dependent” mean.

Perhaps I am missing something.

Maybe @torblednam could shed some light on this.
 
Yes would be interested to see further views on this. The father in this case would be on income of around 50 k, including old age. He did have a reasonably priced apt but rent has now gone up to over 1k per month. He pays maintenance of around 5 k to his ex wife who got the house. He has around 4 k of medical bills annually including health insurance. He has significant cardiac issues, diabetes and has not been in paid employment since his late 40s. The son buying the apt would just visit the odd weekend with grandkids for a sleep over. As I said earlier it would be useful for college accommodation down the road.
 
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The person considering buying the apt wouldn't ask for rent as they will be using it also. Rent even if reasonable would have to be declared and tax paid, PRTB etc.
 
As @Sophrosyne has set out above, dependent relative is defined differently for different purposes / tax heads.

The only context in which dependent relative is relevant in the OP's case, is in considering the potential extension of PPR relief from CGT on a disposal, where a property was occupied rent free by a dependent relative (as defined for the purpose of S.604(11)). That definition doesn't contain any qualifier based on age, in the same way that the CAT dwelling house exemption does.

Also, just to clarify on a point that was brought up earlier in the thread, a person over 65 is not automatically "deemed to be incapacitated", either for the purposes of the PPR CGT relief (S.604 TCA 1997), or the CAT relief (S.86 CATCA 2003):

- in the context of the CAT relief, two distinct classes of person qualify as a dependent relative, (1) a person who is over 65, or (2) a person (of any age) who is permanently and totally incapacitated by reason of mental or physical infirmity from maintaining himself / herself. This does not mean that Revenue, or the CAT Consolidation Act, considers a person who is 65+ is incapacitated; it simply means they qualify by virtue of their age, as specifically provided for.

- in the context of the CGT relief, a dependent relative is as defined, and it's a question of fact whether they are incapacitated from maintaining themselves, either by reason of old age or infirmity. There is no published policy by Revenue that any particular age arbitrarily qualifies a person as being incapacitated.

Based on the information that the OP has provided, it appears there is no question that their parent could be deemed incapacitated from maintaining himself or herself by old age or infirmity, in circumstances where they have an income and are capable of living independently.
 
So, in summary, there would be no CAT implications with the proposed arrangement (because the father is over 65), but the extension of the PPR exemption from CGT would not apply to the apartment (because the father would not be deemed incapacitated from maintaining himself or herself by old age or infirmity).

Right?
 
Sarenco said:
So, in summary, there would be no CAT implications with the proposed arrangement (because the father is over 65), but the extension of the PPR exemption from CGT would not apply to the apartment (because the father would not be deemed incapacitated from maintaining himself or herself by old age or infirmity).

Right?
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On the CGT side, yes.

On the CAT side, not exactly. That definition relates to dwelling house relief, on a transfer of a dwelling house, and there are other conditions to be met. So the over 65 thing is a red herring in this context, unless there's something / somewhere else in the CAT act that it applies.
 
torblednam said:
On the CAT side, not exactly. That definition relates to dwelling house relief, on a transfer of a dwelling house, and there are other conditions to be met. So the over 65 thing is a red herring in this context, unless there's something / somewhere else in the CAT act that it applies.
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Ah, thanks.

So that brings us back to my original point around annual allowances/thresholds (and the fact that Revenue are unlikely to have any interest in a family arrangement of this nature).

Correct?
 
Just to round off the point about the distinction between the CAT and CGT provisions, the CGT relief is more widely drawn, as it brings within the definition of dependent relative, any relative who is "incapacitated by old age or infirmity", whereas the equivalent CAT definition is "permanently and totally incapacitated". Now, obviously, it's quite unlikely a person incapacitated due to old age is going to recover, but a person who is otherwise incapacitated by infirmity could recover to full health / strength.

"Infirmity", in the absence of a definition in the legislation takes on its everyday meaning, which is "weakness" (physical or mental). So the CGT relief could apply to the case of a relative who is suffering or recovering from a serious medical or psychiatric condition and is given the free use of a property.

I believe there has been a recent TAC determination in relation to the CGT definition. If / when I can find it I will put a link up to it.
 
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