Living with parents and inheriting the home

"how does making a capital loss, even if it is manufactured, make you liable for CGT?!"

Because its manufactured. If you have a choice to sell and make a loss or sell and make a gain, and you choose to sell at a loss, you still pay CGT on the deemed disposal

mf
 
KalEl said:
The donor would not be liable for CGT...how does making a capital loss, even if it is manufactured, make you liable for CGT?!
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Because CGT is assessed on the fair market value of an asset. Normally the sale price will be the fair market value but where it is obviously not (e.g. when the asset is sold for a significant discount to the fair market value) then it is the fair market value and not the discounted sale price that matters.

Post crossed with mf1's.
 
ClubMan said:
Because CGT is assessed on the fair market value of an asset. Normally the sale price will be the fair market value but where it is obviously not (e.g. when the asset is sold for a significant discount to the fair market value) then it is the fair market value and not the discounted sale price that matters.

Post crossed with mf1's.
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That doesn't make any sense. Imagine I sell an investment property to you Clubman.
The property is worth 100,000. I paid 50,000 for it. Forget about the inflation/time adjustment.

If I sell that to you for 10,000 I cannot set the capital loss against another capital gain as it is a manufactured loss. You will be liable for capital gains tax at 20% on virtually the full 90,000.
But I don't pay CGT on a capital gain I haven't made
 
If you sold it to an unconnected third party and all you could get for it was €10,000 then €10,000 is the market value. It was a bad investment. You have an allowable loss (of €50,000 less €10,000) on your investment.

If you sold it to someone at undervalue (€10,000) even though the market value is much higher (€100,000) your gain would be calculated on the market value (€100,000 less €50,000). (i.e. The market value in this case would be the value if you sold to a third party that wasn't connected).

Obviously the loss and gain calc's are a bit more detailed than that.
 
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Newby said:
If you sold it to an unconnected third party and all you could get for it was €10,000 then €10,000 is the market value. It was a bad investment. You have an allowable loss (of €50,000 less €10,000) on your investment.

If you sold it to someone at undervalue (€10,000) even though the market value is much higher (€100,000) your gain would be calculated on the market value (€100,000 less €50,000). (i.e. The market value in this case would be the value if you sold to a third party that wasn't connected).

Obviously the loss and gain calc's are a bit more detailed than that.
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This makes no sense at all...the Revenue do not tax this same transaction twice.
The buyer has made a capital gain through this undervalue. They get hit with the CGT. The vendor has artificially manufactured a capital loss so pays no CGT, but equally cannot utilise this fake capital loss elsewhere.
 
My previous posts were two separate scenarios.

If the property is worth €100,000 (what someone else would be willing to pay for it) and you sell it to someone at €10,000 - your capital gains tax will be based on the market value of the property (€100,000) less allowable costs.

See here, particularly Chapter 1 Point 3 and Chapter 3 point 2 which relate to market value.

There would be Capital Acquisitions Tax implications for the person to whom you sold the property as it would be a gift.
 
Fair enough, read those Revenue Leaflets.

It still seems a very odd to hit someone with CGT when they haven't made any gain.

3.2 seems to suggest the buyer will be deemed to have bought the asset at market value. This would suggest no CAT liability which cannot be the case?
 
Unfortunately odd or not Newby is correct. Have come across this myself except with the added layer that the house was originally inherited.

Ie Grandfather left house to his daughter (all necessary tax, inheritance etc paid) approx 30 years later the owner wanted to gift the house to her daughter. Was advised by Revenue this would trigger CAT (obviously) to the recepient but would also trigger a CGT liability for the owner. Because of increasing house prices in the area it would cost the owner appprox 60 grand to gift the house to her daughter! The two taxes can be offset against each other but the value of the house was under the limit of Mother-daughter gift so no CAT payable. Still left a CGT bill of 60 Grand plus stamp duty (at half the rate).

In this case it wasn't the PPR of the owner.

In the end mother left things as they were, she died about 2 years later and left the house in her will to the daughter. Value of house had gone over the threshold but daughter was living in the house 4 years as her PPR so availed of the Dwelling Home Exemption (mentioned earlier in the thread)
 
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