Gift Tax on Sites

C

conker

Guest
My father has gifted me two sites, which I intend to sell. The sites are currently part of my father's farm.

Will I have to pay gift tax on the proceeds from the sale of both sites (worth €40k each), even though if my father sold them and gave me the €80k I wouldn't have to pay gift tax, but would my father have to pay CGT on the sale.
 
> Will I have to pay gift tax on the proceeds from the sale of both sites

No. The value of the sites would be assessable for gift tax but the parent to child exemptions may mean that there is no actual gift tax liability.

[broken link removed]

You would then be liable for CGT on any gain arising from the sale based on the difference between the disposal price less the assumed acquisition cost (market value at the time of transfer - I THINK!) (less the usual annual CGT allowance of €1,270, any allowable expenses, any previously incurred capital losses etc.)

[broken link removed]

If your father sold the sites then he would be liable for CGT on any gain (sale price less acquisition price indexed for inflation up to December 31st 2002, less annual CGT allowance, less allowable expenses and previously incurred losses etc.) and the cash gift to you would be assessable for gift tax but perhaps under the relevant exemption limits.

Sounds like it could be more tax effective all round for him to gift the sites and for you to sell them rather than him selling them and gifting you the money.

Disclaimer - I am not a tax expert so if in doubt get independent, professional advice on the tax and/or investment aspects of this situation.

ALSO - the fact that farmland is involved may mean that other tax treatment or exemptions apply!
 
The total CGT payable on the transaction is the same whichever way you do it,it will just effect who is liable for the CGT.
CAT is not an issue if you are within the allowed threshold.

Stamp duty might be a consideration. SD of 4% is payable on sites valued >40000, 3% if in the range 30001-40000.
The exemption from parent to child is not available as the site is not for your own residence.
However the normal relief of 50% between family members is available.
There will be some stamp duty liability if your father transfers the site to you but none if he gives you the cash, This would leave him with the CGT liability .
 
get your father to gift the land 2 you.
Get the site valued as close to the sale price as possible.- stamp duty on gift 4% , therefore the value of the site for cgt is the higher value ,cgt 20%, better to pay 4% than 20%.
 
a bit confused

I think I'm getting it:

If my father gifts me the sites, I will not have to pay CAT as it is under the threshold (€80k). However, I may have to pay CGT on the proceeds from the sale, and I will aslo have to pay stamp duty.

What is the "normal relief 50% between family members is available"
 
> What is the "normal relief 50% between family members is available"


Stamp duty on transfers of assets between family members is charged at half the normal rate applicable - except in the case of transfers of assets between married spouses in which case no SD is charged.

Apologies if any of my original reply was misleading or inaccurate! :eek:
 
If your father gifts the sites to you then he has to pay the CGT on the difference between market value and original cost plus you pay stamp duty.
When you sell the site you pay CGT on difference between
sale price and your cost,however as your cost will be the market value at the date of transfer of the site to you this will mean your CGT should be nil.

Example Site value 40000 and original cost 2000.
CGT payable by father 40000 -2000=38000
less annual allowance 3000
Taxable value 35000
CGT 20% 7000

sTAMP DUTY 40000 * .03 *.5= 600

You then sell site for eg 45000 to third party
CGT payable is 45000 -40000=5000 -3000=2000 *.2=400


There is no saving in CGT by transferring the site but there is an additional stamp duty cost.
But this is matched by the use of the additional CGT personal allowance of 3000 if the final selling price exceeds the cost from the father by at least 3000.
3000 personal allowance worth 3000*.2=600 CGT saving same as stamp duty in this instance
 
getting more confused

Thanks for all your replys:

OK here is the scenario. My father inherited the farm from his father in 1979, market value nominal.

I do not understand this point:

"If your father gifts the sites to you then he has to pay the CGT on the difference between market value and original cost plus you pay stamp duty."

Why does my father have to pay the CGT as he is getting nothing for the sites from me, so he is not actually making any Gain, if anything he is making a loss.

Also I thought the Allowance was €1,270 as mentioned above, not €3,000.

I think I need an Accountant.
 
getting more confused

> Why does my father have to pay the CGT as he is getting nothing for the sites from me, so he is not actually making any Gain, if anything he is making a loss.

Because Revenue work off the market value of assets at disposal for the purposes of CGT assessment. Even though no money is changing hands and the value of the gift may be below the relevant Gift/Capital Acquisition Tax threshold for the recipient (you) your father is still liable for CGT on the market value of the sites less the acquisition cost less the other allowances and exemptions. I suppose one reason might be that if the donor had no liability for CGT on a gift then s/he could simply hand it to the a son or daughter thereby avoiding a significant tax bill for no good reason.
 
You must log in or register to reply here.
Back
Top