Mortgage and gift tax

P

pmorddny

Guest
Hi,

I am in the process of purchasing a house from our 4 siblings for 250k. Our mother died last year, and the house was valued at 280k for probate purposes. For the purposes of the mortgage, the house was valued in March at 270k.

I've got two questions:
  1. Is there a gift tax liability seeing that we're paying less than the market valuation. What market valuation would revenue rely on?
  2. Because we're buying for less than market value, the bank want our solicitor to certify that there will be no third party interest in the house after it's sold to us. That's not that straightforward as it turned out.

    Our solicitor is suggesting that we get an oath from each sibling stating that they will have no interest in the property after the sale. This could turn out to be an expensive solution. Is there any other way to get around this? ie pay market price to my siblings, and get them to pay towards the many repairs that we need to make to the house?

Any advice is appreciated.
 
Where there's any element of a gift involved in a house purchase, or a below-value purchase as in this case, it's common for the lender to seek a "gift letter" confirming that the donor will have no interest in the property and that the gift is not a loan. Normally such a letter is simply written by the donor themselves and given to the bank. Would the bank simply accept such a letter from your siblings without it coming from the solicitor?
 
Thanks LDFerguson, that's helpful!

Will I be liable for Gift tax on the 20k or 30k that is being gifted to me by my siblings? I don't think I'd be liable if it were my parents. However, that may not be the case if it's my siblings gifting it to me?
 
I'm not a tax professional so don't take my word as gospel - get proper tax advice. But I know that anyone can receive a gift or inheritance of up to €33,208 from a sibling and be under the threshold so I'd imagine that this transaction may be exempt, especially as it appears you're receiving the gift from four siblings. (That €33,208 if a lifetime figure by the way, so if you've received other gifts in the past or do so in the future, all would be counted.)
 
Thanks for the advice everyone! I spoke to the solicitor about a 'Gift letter' but apparently it's not iron clad enough for the bank.

The annoying part of all this is that we're paying the realistic price of the house based on other houses that have recently sold, not the valuers price which seems to be overinflated at best, and we have to jump through extra hoops because of it.

On a positive note, at least we're not liable for gift tax since it's under the threshold.
 
If you're satisfied that what you're paying is in fact the market value, based on other similar sales, and that you could stand over it, I don't see any reason why you should be bound by the opinion of the bank's valuer. Revenue's staff have much bigger fish to fry than to be arguing with you over whether or not you got a notional gift of 20k from your several siblings, which in any case doesn't give rise to any tax liability...

On a slightly different note, if the estate hasn't yet been settled it may be worth asking your solicitor if a deed of family arrangement can be used to effect the necessary change of ownership. This could get around several of the issues that are cropping up.
 
Surely the banks standard Deed of Confirmation will suffice re addressing their concern over your siblings retaining an interest in the property?
 
mandelbrot said:
On a slightly different note, if the estate hasn't yet been settled it may be worth asking your solicitor if a deed of family arrangement can be used to effect the necessary change of ownership. This could get around several of the issues that are cropping up.
Click to expand...

A deed of family arrangement could be done but is the very same at this stage as a standard deed of transfer so it will not get around any issue that I can think of.

I don't accept that there is a gift here at all. You are buying at todays value, today. But worst case, you are within the exemption limits.
 
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