Capital Gains Tax with 2 different purchase prices.

[RosieD]

Hi
I have a query on CGT, I purchased a house with ex partner in 2002 for €154,000 it was our ppr, we broke up in 2008 and I bought his share out. House was valued at €300,000 at the time, I paid €2500 in stamp duty and had to give €80,000 to ex partner for his share.. I started to rent out the house in 2010. House is been sold now and has gone sale agreed for €275000. I am trying to figure out how to calculate what I will have to pay in CGT due to the 2 different purchase prices I've tried sending an enquiry on ros but not getting much feedback. Any feedback here would be greatly appreciated.

Also if I have no paperwork confirming the legal fees paid in 2002 and 2008 is there a formula I am allowed use to calculate approx fees paid?
Thanks, Rosie

 

[jpd]

I would start with you paid 50% in 2002 so that's € 77,000 and a further € 80,000 in 2008 - so a total of € 157,000 plus fees 2,500 = € 159,500

You are now selling it at € 275,000 so that's a gain of € 115,500

You owned the house for 21 years and it was your PPR for 8 years, let's say 2002 - 2010
You get relief for an extra year at the end of ownership, so that will be 9 years in all
PPR relief is 9/21 = 43% of the gain or € 49,665
Taxable gain is € 65,835 less personal annual allowance € 1,270 = € 64,565
Tax at 33% = € 21,306

This is an estimate as you will have to use precise dates for the period of ownership and PPR - use months

 

[Dr Strangelove]

I don’t think that’s the right approach @jpd

There is no gain on the 50% share bought in 2008 so shouldn’t be a liability.

 

[Brendan Burgess]

House was valued at €300,000 at the time, I paid €2500 in stamp duty and had to give €80,000 to ex partner for his share..

I presume you took over the full mortgage, so in reality you paid €150k?

Brendan

 

[RosieD]

Thank you both for taking the time to reply. Yes there was a joint mortgage so in 2008 I took over the mortgage in my own name

 

[T McGibney]

The OP clearly needs professional assistance here. The 2008 valuation is clearly relevant to the question of the base cost for the half share acquired on the split, but care would need to be taken that it's correct and appropriate to use for CGT purposes.

 

[Brendan Burgess]

I am not a tax expert, but I would make a submission as follows. Send in your calculations and make a note that the legal costs are estimated. I don't really see Revenue arguing with you.

 

[T McGibney]

I am not a tax expert, but I would make a submission as follows. Send in your calculations and make a note that the legal costs are estimated. I don't really see Revenue arguing with you.

View attachment 8181

What happens in that scenario Brendan if there's something wrong with the valuation used in 2008?

 

[Dr Strangelove]

but care would need to be taken that it's correct and appropriate to use for CGT purposes.

Who in earth is going to challenge a professional valuation from 15 years ago on which stamp duty was paid?

 

[Brendan Burgess]

What happens in that scenario Brendan if there's something wrong with the valuation used in 2008?

Hi Tommy

It wasn't so much a valuation as the price she paid and she paid stamp duty on it.

Given the overall trend in house prices it seems reasonable.


It seems unlikely that they will challenge it so I would just go ahead and be totally open about all the figures.

If Revenue challenges it, a bigger issue might be CAT rather than CGT.

Brendan

 

[jpd]

I'm confused as the amount paid in 2008 was € 80,000 not € 150,000

 

[Gordon Gekko]

I'm confused as the amount paid in 2008 was € 80,000 not € 150,000

The payment must have reflected the amount outstanding on the mortgage. Because the OP was taking over 50% of it, that was factored into the price.

 

[jpd]

I understand that, but only 80,000 was paid

 

[T McGibney]

I understand that, but only 80,000 was paid

Irrelevant.

 

[T McGibney]

It seems unlikely that they will challenge it so I would just go ahead and be totally open about all the figures.

If Revenue challenges it, a bigger issue might be CAT rather than CGT.

Hi Brendan

The risk of a Revenue challenge here wouldn't cost me a thought.

I'd be far more worried about the risk of unnecessarily overpaying CGT.

 

[T McGibney]

Who in earth is going to challenge a professional valuation from 15 years ago on which stamp duty was paid?

See my reply to Brendan.

 

[Brendan Burgess]

I'm confused as the amount paid in 2008 was € 80,000 not € 150,000

That was the cash. She took over the mortgage as well.

Brendan

 

[jpd]

But that's not a cash outlay

 

[Brendan Burgess]

I purchased a house with ex partner in 2002 for €154,000 it was our ppr, we broke up in 2008 and I bought his share out. House was valued at €300,000 at the time, I paid €2500 in stamp duty and had to give €80,000 to ex partner for his share..

I suspect it was something like this.

House worth €300k
Mortgage :€140k
= Equity: €160k

So she took over "his" share of the mortgage - €70k and paid €80k cash = €150k.

Brendan

 

[Dr Strangelove]

For me this should be thought of as two 50% shares of the house.

Share 1: owned by the OP since 2002. Capital gain of €137.5k-€77k=€60.5k. Reduced to 9/21 so €26k. Less applicable fees less personal exemption, etc.

Share 2: owned by the OP since 2008. No capital gain so no tax liability.

Wiser heads might advise whether loss on share 2 can be offset against gain on share 1.