CAT on joint purchase of house

D

Duke of Marmalade

Registered User
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Situation
A has 200k for a deposit
B has zilch for deposit
A and B get a joint mortgage for 200k and buy a house in joint names for 400k
Has A gifted B 100k for CAT purposes?

Today's Sindo says this is the case
 
I wouldn't have thought so. This happens all the time and I doubt that they make a CAT return.

They should do a written agreement which could be either of the following:

1) A owns 75% of the house and B owns 25%.
They each owe half the mortgage

2) A and B each own 50% of the house.
The mortgage is B's responsibility.

Brendan
 
The Sindo piece is here (Third question) and although the author is a tax professional, I doubt if he is right.



His question is different from yours.

The father is giving the son a gift of €250k.
The son and his girlfriend are buying a house together.

There are two stages here.
If the father gives the son a gift of €250k, there is no CAT.
If the father gives them a joint gift, there would be CAT.

Stage 2
Son has €250k cash
Girlfriend has nothing.
They buy a house jointly.

If they own the house 50/50 , the the son has given his girlfriend a gift of €125k and it would be subject to CAT.

She gets €225k worht of house for half a mortgage of €100k

But my solution works.
He should own 250/200ths of the house and she should be responsible for the mortgage.

If they get married, he can then gift her half the house.

Practical considerations.
Relationships break down. They should have an agreement acknowledging the ownership.

Brendan
 
Not sure that would work in practical terms. The lender would probably want joint ownership of both the house and the mortgage especially if joint incomes were taken into account in approving the mortgage.
The example in the Sindo did involve a married couple. Surely it is happening all the time that daddy is throwing a 100k or so to the son to give him a leg up. I can't believe this leads to a CAT liability on a gift of 50k to a third person - the daughter in law.
 
Duke of Marmalade said:
Not sure that would work in practical terms. The lender would probably want joint ownership of both the house and the mortgage especially if joint incomes were taken into account in approving the mortgage.
Click to expand...

Absolutely. The lender would not be involved in this at all.

Their solicitor should draft a side agreement setting out the ownership of the property and what happens in the event of the relationship breakdown.

Brendan
 
What a lender is told and reality can be two very different things.

Parents often lend their kids money to buy a house; however, the bank can insist on it being a gift. So everyone tells the bank it’s a gift and then documents it correctly somewhere else. Even to the point of saying that the declaration provided to Bank X on Y Date is total horse manure.
 
Forget about whether A got a gift or a loan from daddy. Has A given a gift for CAT purposes to B?
 
Technically, yes, but you just document it as Brendan outlined.

i.e. instead of being joint tenants, the purchasers are tenants in common with unequal percentages.

Or as an alternative the recipient of the gift then loans money to his/her other half which doesn’t trigger any CAT.

But in reality Revenue have zero interest in such arrangements.
 
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