Brendan Burgess
Founder
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You must have misunderstood them so. A person can sell their property to someone else at whatever price they both agree.
The tax will be based on the market value not on the price.
Brendan
Buying in-laws out of family home
- Thread starter majellahayes
- Start date
You must have misunderstood them so. A person can sell their property to someone else at whatever price they both agree.
The tax will be based on the market value not on the price.
Brendan
JohnDoyle1973
Registered User
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No. Its perfectly clear. A Non arms length transaction is deemed market value. So no, in the context of this scenario, within a family, a valuation at the market rate will apply. Thats the legal and tax view. The difference between gifted value and the market value is seen as a taxable gift. So if this house gift value is €90k and the real market value is €200k the gift given is valued at €110K.
I have a link to outline this but I'm not allowed to post links.
Brendan Burgess
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John, you are saying that the MIL can't sell to them at the price she wants to. She can.
That is completely separate from Revenue's view of the transaction.
Brendan
That is completely separate from Revenue's view of the transaction.
Brendan
JohnDoyle1973
Registered User
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Well Brendan, yes, she can, but it would place the poster in a predicament longer term. Because it is an inter family transaction its a gift if sold below market value - difference between gift and market value. Thats why I got market values for my transaction as its transparent, a good tax advisor will recomend the same unless it can be tranferred through thresholds - €335k is his allowance I think but siblings might not like that.
There is also the benefit of rent free living for 15 years. Thats another situation that needs legal and tax advice.
If it were me I'd look at life time interest for the MIL and an agreement to back up same, transfer to son under threshold and use loan to pay off siblings. If I were a sibling though I'd probably not be happy with €30k as a payoff that would be taxable. Also...what about long term care of MIL if she got ill? Fair deal implications?
JohnDoyle1973
Registered User
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No not really. Its clear to Revenue, we did due diligence, its legally correct. Depending on the lowest cost we can probably do better than one valuation.
Annieindublin
Registered User
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They paid rent. I wonder if she declared this as income?
JohnDoyle1973
Registered User
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This is my worry, plus the rent free living. Thats not declared.
T McGibney
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My fear is that Revenue could turn around, consult the highest valuer, ask them to confirm the valuation they specified to you, and insist that this valuation be used.
Annieindublin
Registered User
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- 128
They didn’t live rent free.
Is rent free living a taxable gift anyway? There’s a lot of young adults living with their families
Is rent free living a taxable gift anyway? There’s a lot of young adults living with their families
JohnDoyle1973
Registered User
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No they just ask for a range of valuers and accept the average value. They have a valuer in each county that they check with and we used him.
JohnDoyle1973
Registered User
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They did for part of it - thats how it reads to me 'We paid rent years go but took over all bills and maintenance of house' so it seems like she understands it as maintenance and bills etc constitute a consideration against rent. Not so in Revenues eyes. Rent free is a benefit that is taxable, and yes there are lots of young people living at home - thats different than them having a family and living rent free for a long period of time.
Brendan Burgess
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Great. Glad that is cleared up.
JohnDoyle1973
Registered User
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Hmmm. Thats a bit sharp tbf. Of course anyone can do anything they like, however....there are consequences. So quoting part of my post to prove a point while ignoring the consequences is not great. I was previously a user on this site and left because of this sort of 'in house' pedantic stuff. The facts are yes she can get the house at any price she wants IF she wants to pay the consequences of that down the line. Maybe its time for me to leave again?
Brendan Burgess
Founder
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You posted wrong information not once but twice. There is nothing "pedantic" about correcting wrong information.
You were in serious danger of misleading the person who asked the question. I clarified that.
Brendan
JohnDoyle1973
Registered User
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What an odd take Brendan.
The poster posted her query.
Other posters helpfully added advice.
I added my advice, relevant as I have just been in this exact same position, had a meeting with Revenue, employed a solicitor who was recomended by my tax advisor and prepared a return based on their advice.
You weighed in casting doubt on that advice. (Even though I have just had that advice and paid for it)
I replied saying I couldnt post a link that was relevant to what I said.
You messaged me to say I could post links.
I still couldnt post the link
I sent you the link privately ( Dominic Coyle) - which outlines exactly the situation and outlines the response which was the same as what I was told.
You resond telling me I have it all wrong.
You half quote my post to make you appear right.
I respond.
You half quote my posts again inferring I'm incorrect (I'm not)
Your posts have created doubt for the poster. Not mine.
To be clear - the poster cant evade tax here, she has to pay the difference between what she agrees to pay for the house and its market value - thats the legal and Revenue position.
She also has to account for her free use of the property.
Both things for her to consider. Both correct.
You made me remember why I disliked this site so much in the past. Do you want people to use this site or not?
LINK BELOW
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Buying mother’s house at less than market value could cause tax headaches
Q&A: Dominic Coyle
Brendan Burgess
Founder
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Hi John
All you had to do was to clarify your original post which was wrong.
You said that they could not sell the property for the lower price. That was wrong.
You should have immediately clarified...
"You can sell the property for any price you like, but from a Revenue point of view, it is the market value which matters."
It is entirely up to you whether you continue posting or not. But if you or anyone else posts incorrect or unclear information, then it will be corrected.
Brendan
All you had to do was to clarify your original post which was wrong.
You said that they could not sell the property for the lower price. That was wrong.
You should have immediately clarified...
"You can sell the property for any price you like, but from a Revenue point of view, it is the market value which matters."
It is entirely up to you whether you continue posting or not. But if you or anyone else posts incorrect or unclear information, then it will be corrected.
Brendan
This is pretty significant so I had a look at it and found this:
Ask an expert: ‘Our son is living rent-free in our second house. What are the tax implications?’
Sinead Ryan answers your property finance questions.
www.independent.ie
In case of a house rented to a child for free/reduced rent, the difference between the rent charged (if any) and the market rent is regarded as a taxable gift for capital acquisition tax, except where your son is either under 18 or under 25 and in third-level education.
“The first €3,000 of the total value of all gifts received from any one person in any calendar year is exempt. As your property is jointly owned by you and your wife, your son can benefit from €6,000 tax free gifts. So, if the annual market rent is €6,000 or less, your son will face no tax bill.
"If the amount of the deemed gift exceeds the annual exemption of €6,000, then the relationship between the person who is giving the gift and the person who is taking the gift is essential for determining the capital acquisition tax liability. The Group A threshold (gifts/inheritances from parents to children) currently amounts to €335,000.
“This threshold is a lifetime threshold and any gifts or inheritances received within the same group must be aggregated. Where the amount of gift or inheritance exceeds 80pc of the group threshold, your son will be required to deliver a CAT return called IT38. The tax implications for you could be more complicated.
“If no rent is charged, there will be no further tax obligations. However, if a reduced rent is charged you will be subject to tax at your marginal rate (up to 52pc) on your rental profit (gross rental income less allowable expenditure). Rental profit must be reported on your annual tax return(s) which could be either Form 12 or Form 11. People whose total net non-PAYE income is less than €5,000 (but not nil) can file a tax return Form 12.
“However, if your non-PAYE income exceeds the amount of €5,000, you will have to register for self-assessment and deliver a self-assessed tax return Form 11 each year. In case of jointly assessed couples the €5,000 threshold is applied to the joint non-PAYE income of both spouses.
“In addition, if you cannot make a profit from the rent received, this will be considered an uneconomical letting. You cannot offset losses you make from uneconomical rentals against other rental profits.”
One interesting point, as a landlord, in relation to this bit:
“In addition, if you cannot make a profit from the rent received, this will be considered an uneconomical letting. You cannot offset losses you make from uneconomical rentals against other rental profits.”
How does that work with landlords caught by the RPZ rules into uneconomical letting.
“In addition, if you cannot make a profit from the rent received, this will be considered an uneconomical letting. You cannot offset losses you make from uneconomical rentals against other rental profits.”
How does that work with landlords caught by the RPZ rules into uneconomical letting.
That doesn't sound right to me. I think the standard is 3 valuations and you add them up and divide by 3 to arrive at a fair valuation.
I'm not so certain this is correct, not when it's the family home and you are looking after a relative/parents.