House purchase from brother, Gift Tax Query ?

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greenwoodguy

Registered User
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Hi

i am about to purchase a house from my brother with my fiancee, We have agreed on a price of 240,000 for the house and have been issued a loan offer from the bank, The bank has a valuation of the house for 275,000

Our solicitor asked for a copy of the banks valuation and has said we may be liable to gift tax on the 35,000 difference between the sale price and the current market value on the banks valuation ?

He has also said we will have to pay stamp duty on the house at 275,00 rather than the 240,000 we are paying for it

is this the norm and would we be liable for gift tax in this situation ?

Any advice at all would be greatly appreciated

Many Thanks
 
Well it stands to reason that the difference between what the house is worth and what you're paying for it is a gift.

So then it's a question of what the relationship is between the parties to establish which threshold applies etc... there may not be much of a taxable gift, if the ownership is passing from a brother and his spouse, to a sibling and spouse.

The gift value is 35k - the brother can gift 3k each to the sibling and their fiancée, and the brothers wife can too, so that's the first 12k. That leaves a gift of 11.5k each to the sibling and their spouse.

If the selling brother isn't married, then the 12k becomes 6k, and the 11.5k becomes 14.5k.
 
If its worth €275,000 why is your brother selling it to you at a lower value. How did yea come up with the lower value?

Has the house been on the market for a low time with no offers?
 
he bought the house for 219,000 and lived in it for 2 years, we agreed on that as we both think it is a fair price (he is doing me a big favour)

Would he not be able to gift me €30,150 as i fall in category B on the gift tax table, and gift fiancee €15,075 as she falls under cathegory c in the table ?

I have read that if the gift is not more than 80% of the gift threshold that it wouldnt have to be declared so

275,000
-240,000
-------------
35,000 (gift)
- 24,120 80% of threshold for me
- 8,120 80% of threshold for fiancee
--------------
- 2,760 that leaves us coming in under the 80% treshold that has to be declared ?

would i be correct in this assumption ?
 
greenwoodguy said:
he bought the house for 219,000 and lived in it for 2 years, we agreed on that as we both think it is a fair price (he is doing me a big favour)

Would he not be able to gift me €30,150 as i fall in category B on the gift tax table, and gift fiancee €15,075 as she falls under cathegory c in the table ?

I have read that if the gift is not more than 80% of the gift threshold that it wouldnt have to be declared so

275,000
-240,000
-------------
35,000 (gift)
- 24,120 80% of threshold for me
- 8,120 80% of threshold for fiancee
--------------
- 2,760 that leaves us coming in under the 80% treshold that has to be declared ?

would i be correct in this assumption ?
Click to expand...

What's the problem with declaring it??

The only way to split it the way you're talking about, would involve you owning (say) 54% of the house and her owning 46% (haven't bothered calculating it, you get the jist), and that makes everything unnecessarily messy, for the sake of avoiding a form.
 
Don't have a problem declaring it, i was just wondering am i correct in the figures i have worked out in relation to the amounts and exemptions from tax ?
 
If, you're paying €270k for the house (as per your other thread), Gift Tax won't apply.

Going by your other thread; you have mortgage approval for €216k, savings of €24k & €3ok from your mother but have you allowed for fees etc.?

Your figures on both threads contradict eachother - you need to clarify the numbers.
 
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