Is the gift of a dwelling house excluded from the aggregation rules for CAT

If a father gives a daughter a dwelling house worth €500k and it qualifies for Dwelling House Exemption, is the €500k used for aggregation purposes?

In other words, if the father subsequently gives the daughter €300k, has the €500k used up the €330k exemption and so the €300k is subject to CAT in full? Or is the dwelling house ignored completely?

I assume it is ignored, in which case, parents who will be leaving a child in excess of €330k should buy expensive houses and allow their child to live in it.

With 1% stamp duty, this is now viable. When stamp duty was 9%, this would not have worked as well.

But if this is the way it works, it is unfair and should be changed so that inheriting a home, while exempt from CAT, should count in the aggregate.

Brendan

Brendan I'm almost 100% certain that CAT relief was done away with except in cases of inheritances, ( to stop millionaires buying million euro houses and putting children into them and giving them to them tax free) will try dig out legislation wherein it was abolished

Hi Card

I don't think it has been done away with. I can't find any discussion of it online. The document on the Revenue website doesn't mention it.

Brendan

Hi Brendan

It's excluded from the aggregation (and the planning you allude to happens in practice).

Gekko said:

Hi Brendan

It's excluded from the aggregation (and the planning you allude to happens in practice).

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By allowing the child to live there rent-free is there not a deemed gift, ie the difference between Market rent and what is actually received... and if so, that would eat into the CAT threshold over time...?

Yes - Over time that could be the case.

There's also a 3 year qualifying period of occupancy, any period whereby the parents also occupy the house will be disregarded for the purpose of the relief, unless they lived together due to the dependence of the parents by reason of old age or infirmity

I have a similar query for which I'd be very grateful for an answer:

An unmarried couple who jointly own a house (their only house) decide to
separate;
Man requests sole ownership;
House has appreciated by €100,000;
They agree that the man gives the woman €50,000 to buy the woman out.

What is the tax liability on the €50,000 - if there is any - is it gift tax, CAT
or CGT and who pays it?

boltownes said:

I have a similar query for which I'd be very grateful for an answer:

An unmarried couple who jointly own a house (their only house) decide to
separate;
Man requests sole ownership;
House has appreciated by €100,000;
They agree that the man gives the woman €50,000 to buy the woman out.

What is the tax liability on the €50,000 - if there is any - is it gift tax, CAT
or CGT and who pays it?

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Just to clarify, what you're asking about is a situation where one party is buying the other party out, so the man is giving the woman €50k as consideration for her half interest in the house?

If so, there is no gift, except to the extent that the €50k actually exceeds what her share of the house is worth. (e.g. house is worth €250k, but the man buys out the woman for €300k - for tax purposes there would be a gift of €175k [€300k - €125k])

Assuming she has lived in the house as her Principal Private Residence throughout her period of ownership (apart from the last 12 months, which she is deemed to have lived there, even if she didn't) then any gain she made on disposing of her interest in the house would not be subject to CGT.

The situation could / will be complicated by (I presume) the existence of a joint mortgage, so professional advice should be sought...

Thanks very much Mandelbrot,
Yes, there was a joint mortgage, but now it is in the man's name only. The house was bought for €200,000 and valued at €300,000 at the time of the change of ownership. The €50,000 represents half the increase in value, over when it was jointly owned (Her share of the house was worth €150,000 and her share of the mortgage outstanding was €100,000).


Does this change things? Many thanks again.

boltownes said:

Thanks very much Mandelbrot,
Yes, there was a joint mortgage, but now it is in the man's name only. The house was bought for €200,000 and valued at €300,000 at the time of the change of ownership. The €50,000 represents half the increase in value, over when it was jointly owned (Her share of the house was worth €150,000 and her share of the mortgage outstanding was €100,000).


Does this change things? Many thanks again.

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No that doesn't change anything, it's exactly what I would've expected you meant!

She has received €150,000 for her half share in a house that is worth €300,000:- €50,000 of it is cash, the other €100,000 by way of her debt being taken over by someone else.

CGT rules apply to her, but as I said earlier if she occupied the house as her residence for substantially all of her period of ownership, then she would be entitled to PPR relief from CGT.

As for the person paying over the money, they have not given anyone a gift, they've paid €150k for half of a house worth €300k.

Thanks!, I get it now. That is very helpful. Can I ask one last thing - what section of what Act would deal with PPR relief from CGT?

boltownes said:

thanks!, i get it now. That is very helpful. Can i ask one last thing - what section of what act would deal with ppr relief from cgt?

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s.604 tca 1997

Brillinat! thanks.