Thanks for response. Yes, Group B threshold is still intact (assume you mean she can qualify for the exemption of around 32K)No, that’s not how it works. You’re selling the property and then gifting the proceeds to her. Credit for CGT against CAT is only available where both taxes arise in relation to to the same property and the same event. In your scenario, it’s not the same property (it’s property vs cash) and it’s not the same event (it’s a property sale vs the gifting of cash).
It would only work if you gifted her the property. The main problem with that is you have to fund the CGT on the disposal from other sources because you haven’t sold it.
What if she bought it from you for an amount that broadly equated to your CGT liability? It should be possible to work that in a way that locks-in the credit.
Is her Group B threshold (siblings etc) still intact?
Thanks for response. It will not qualify as PPR.Can you provide more details on the house to understand your CGT liability? Was it ever your PPR, it might help reduce your CGT, subject to rules...
What if she bought it from you for an amount that broadly equated to your CGT liability? It should be possible to work that in a way that locks-in the credit.No, that’s not how it works. You’re selling the property and then gifting the proceeds to her. Credit for CGT against CAT is only available where both taxes arise in relation to to the same property and the same event. In your scenario, it’s not the same property (it’s property vs cash) and it’s not the same event (it’s a property sale vs the gifting of cash).
It would only work if you gifted her the property. The main problem with that is you have to fund the CGT on the disposal from other sources because you haven’t sold it.
What if she bought it from you for an amount that broadly equated to your CGT liability? It should be possible to work that in a way that locks-in the credit.
Is her Group B threshold (siblings etc) still intact?
Thanks. Yes, prob need some more professional advice.No, you can’t eliminate CGT or CAT that way. Unless you loaned her the purchase price and wrote off the loan over time.
If you gifted the property to her, and we ignore other incidental points, your CGT bill is 33% x €500k, so €167k. Her CAT bill is (€600k - €35k) x 33%, so €186k.
So she pays €21k of CAT.
Big issue is where you get the €167k from because you haven’t sold the house.
I’d look at getting her to pay you something like €167k for the house (get a mortgage etc).
Then you’re gifting her €433k, you pay €167k of CGT with the money she gives you, and she pays no CAT.
Or just give her a right of residence or similar for the rest of her life? Why gift what’s yours to her absolutely?
Either way, I’d get professional advice.
Thanks. I see the Dwelling House Exemption. Unfortunately I have not lived in the house so this does not apply in my case.I used a professional tax advisor ... was a similar transaction.
He said it was one of the most complex cases he had dealt with.
This is a guy who challenged Revenue on a CAT case - the eligibility of Dwelling House Exemption.
He won the case, and Revenue had to rewrite their tax rules.
Thanks for laying this out. At least it does reduce the overall tax impact. But wanted to confirm on the cost basis that will be used. Let's assume the following numbers:This seems pretty simple, and the only costs are a bit of legal and stamp duty, which are a small fraction of the CAT in issue.
Step 1: value the property in January
Step 2: On 1 February, gift your sibling a proportion of the property equal to the amount you want to gift her, based on that valuation (roughly 2/3 based on the figures in your OP).
Step 3: Sell the property. You'll get 1/3 of the proceeds, she'll get 2/3. Provided your valuation was reasonably accurate/ erred on the high side, she shouldn't owe any CGT on her share of the proceeds.
The tax fallout is that you've made two disposals, totalling the whole 500k and will owe CGT accordingly*. This won't be due for payment until late next year.
Your sister will have received a gift of property, but the CGT/CAT offset will apply to the amount in excess of the relevant threshold plus 3k, because your CGT liability on the disposal to her arises on the same event as her CAT liability.
(* Just in case anyone pedantic ambles by, yes, part disposal rules come into play, so the gain / CGT arising on the gift won't be exactly 2/3 of the total gain / CGT, but it shouldn't affect the overall outcome.)
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