CGT on purchase from parents

T

tipet1234

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Looking for a bit of guidance on an Irish CGT question.
My parents inherited a house from an uncle in 2010 (probate value €70k, CAT paid at the time). Neither of them ever lived in it. It’s now been valued at €200k.
I’m planning to buy it from them as my home. I’ll be taking out a mortgage for about €60k, with the rest being an gift equity. and we plan to do an extension after. Approx 130K
From what I understand, because I’m their son, Revenue treats this as a sale at full market value, so my parents would owe CGT on the €130k gain, even though CAT was already paid back in 2010.
Just want to confirm:
Is CGT definitely unavoidable here?
Does the CAT paid on inheritance give any relief at all?
Is there any structuring (part gift/part sale, mortgage setup, etc.) that reduces CGT, or is it simply payable regardless?
I know we’ll need professional advice, but want to make sure we’re not missing something obvious.
Thanks.
 
CGT is Capital Gains Tax - it is payable on a capital gain

Your parents inherited a property in 2010 worth € 70k
They are disposing of it, by a sale, for € 200K (the market value)
Their gain of € 130K is taxable - the tax due is (130,000 - (2 x 1,270) ) x 33% = 42,061
The CAT they paid in 2010 is irrelevant
 
tipet1234 said:
Is there any structuring (part gift/part sale, mortgage setup, etc.) that reduces CGT, or is it simply payable regardless?
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Is the parents part-gift it rather than a sale, is there the same CGT liability?
If there are no other siblings with a future claim on inheritance from the parents, would it make sense to gift it?
 
The only way to avoid CGT is for the parents to die as CGT disappears on death.

But that is a risky strategy as this CGT exemption may be removed.

So the parents should just bite the bullet and pay the CGT.
 
Is there any structuring (part gift/part sale, mortgage setup, etc.) that reduces CGT, or is it simply payable regardless?
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If there were any capital expenses on the property since 2010 your parents could write them off against the capital gain. NB capital improvements...not repairs or upkeep.
e.g. new heating system, new roof, layout changes, improved drainage around the house, rewiring....the list of possible capital expenses is long.
 
locknbarrel said:
If there were any capital expenses on the property since 2010 your parents could write them off against the capital gain. NB capital improvements...not repairs or upkeep.
e.g. new heating system, new roof, layout changes, improved drainage around the house, rewiring....the list of possible capital expenses is long.
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Yes there definitely were improvements made. Extension, new windows & doors etc. Extension work (2011/2012) was direct labour and a lot of cash in hand so receipts is going to be a big issue.
Its a big issue for us as we are getting the house at such a reduced rate I would not expect my parents to cover the cost of the CGT, so we will pay for that. But an extra 40000 is not something we had planned for
 
tipet1234 said:
Extension work (2011/2012) was direct labour and a lot of cash in hand so receipts is going to be a big issue.
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Might be worth checking out this thread...
T McGibney said:
Of course it's possible. Very few property owners for example will have receipts for significant enhancement expenditure incurred a number of decades ago but these are routinely claimed in CGT computations and there are ways and means of obtaining corroborative evidence to substantiate such claims.
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tipet1234 said:
I’ll be taking out a mortgage for about €60k, with the rest being an gift equity.
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What does this mean?
How much are you paying your parents for the property?
Are they gifting it to you in part?
Might you be assessable for CAT/Gift Tax here?
 
The potential CGT reliefs are:
s604: relief for principal private residence - not applicable here
s604A: pro-rata relief for 7 years/total ownership period for property acquired between 7 December 2011 and 31 December 2014 - doesn't seem to be applicable here.

Potential CAT relief
Section 104 CATCA 2003: If CAT is payable by the donee (unlikely due to application of lifetime exemption but possible), credit can be claimed against CAT due for the CGT paid by the parent (disponer) on the same transaction (i.e. on the transfer from the parent to the son). Also known as "Same event CGT credit against CAT". Historic CAT payable by parent is irrelevant.
 
Is this the right house for you? You have to do work to get it to your requirements (although 130k is not unfortunately a significant amount of work to get done) and then potentially pay approx 42k CGT. Would you be better off with a different house more suited to your needs?
 
ClubMan said:
How much are you paying your parents for the property?
Are they gifting it to you in part?
Might you be assessable for CAT/Gift Tax here?
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House is worth 200K. Parent just want 60K, the remaining amount (130K) is a gift to me. Yes I am liable for CAT but it is well below the lifetime threshold for a child of 400K

ClubMan said:
Might be worth checking out this thread...
Click to expand...
So if you can prove the work was done between that time receipts may not be necessary. i.e. google maps showing no extension prior to 2010 and post house been inherited extension been visible would be enough
 
misemoi said:
Would you be better off with a different house more suited to your needs?
Click to expand...

A really good point. Your parents are going to have to pay CGT anyway. So why not sell it and give you the net proceeds and let you buy the house you want where you want.
 
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