Buying house from family member at lower than market value price

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Driene

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Hi I would love some advice on the tax implications on me and my uncle.

He built a second property and has rented it since building it (he has never lived there) but now is happy to sell it to at a lower than market value.

The house is worth 300k and he is happy to sell to me at 200k.
The house cost him approx 150k to build.

What tax implications will we both face or what would be the best way to do the sale?

Any advice or help welcome !
 
Your uncle will have realised a gain of 200k - 150k so will be liable for Capital Gains Tax = (50k - 1.27k exempt) x 33% = 16.1k.

You will have received a gift of 300k - 200k so will be liable for Capital Acquisitions Tax = (100k - 32.5k Group B threshold) x 33% = 22.3k.

This assumes you have not previously received gifts from anyone that count against the Group B threshold.
 
Tax: treated as him selling at 300k, with 100k gift to you. He'd pay CGT on 150k less allowable selling expenses.
You'd be liable for gift tax on the amount of 100k that's outside your gift threshold. However there's a credit available for you for the amount of CGT he pays so long as you don't sell within 2 years.

Stamp duty is based on market value.

Similar post here that explains it:
https://www.askaboutmoney.com/threads/help-please-buying-house-from-parents.206396/
 
dub_nerd :

thank you for the help.
so even though the house is worth 300k will this not effect how much Capital Gains Taxs he pays? or is it being offset by paying CAT?

RedOnion : thank you for the help

One thing ... what does "credit available for you for the amount of CGT he pays so long as you don't sell within 2 years" mean or would you know where i would find more info on this?

Thanks
 
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Is it the cost of building the house or the value of the house when built that is used for the CGT calculations ??
 
One would imagine the property tax he's paying would determine the value of the property. You say it's worth €300k, where did you get that value from and is it on that price he's paying his property tax?
 
"The basic rule is that market value is the price which an asset might reasonably be expected to fetch on a sale in the open market." taken from the revenue

I am making a judgement on recent sales of houses in the area.
 
"The house cost him approx 150k to build.".

Where did this calculation come from ?
Was this on a site that he already owned ? I think that that value of the site would also have to be part of the "cost" to him in calculating CGT.
 
Driene -- the capital gain for your uncle is the difference between the price he buys (or builds) at and the selling price. Nothing to do with the notional value.

RedOnion is right though, which I forgot about ... there is a rule that prevents capital tax being charged twice on the same event. That is, when your uncle sells the house (the "event") your CAT and his CGT should not be charged on the double. I'll try to dig out the revenue reference.

EDIT: here you go: https://www.revenue.ie/en/gains-gif...nst-cat/credit-for-capital-gains-tax-cgt.aspx
 
RedOnion said:
Are you certain about that? Maybe I've misunderstood your post?
Click to expand...

The fact you're questioning it makes me less sure. :)
But I'm going by Revenue's own definition: "Capital Gains Tax (CGT) is a tax charged on the capital gain (profit) made on the disposal of any asset. It is paid by the person making the disposal. The gain/profit (the difference between the price you paid for the asset and the price you sold it for) is considered taxable income."
 
It’s market value, i.e. €300k.

100%.

CGT based on market value less base cost less allowable expenses.

CAT based on €300k less Group B threshold less Small Gift Exemption.

Stamp Duty of €3k (i.e. 1% of €300k).

Credit for CGT against CAT if property retained for 2 years.
 
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