Potential downsides ?
would there be CGT arising for the disponer of that property asset even though it has realised zero consideration ?
if there is CGT paid, a credit against the gift tax would be available,
Net liability of child: €20k
But if you sold a property for €500k and gave him the proceeds, there would be no CGT credit.
Ha ha, so you think it doesn't happen?If there is one thing that Revenue people hate, its inherited wealth.
It means they have not extracted enough tax from you.
You cant talk about gifting family members cash - banks are obliged to report cash withdrawals above 3K.
If there is one thing that Revenue people hate, its inherited wealth.
What "exactly" are you saying happens?BB, in my experience, it does happen.
Its very much down to R. individual's version of CAT interpretation.
.Agree that you should not allow the tax tail to wag the dog.
If it makes sense to give a gift to your child now or in the near future, do it now just in case the threshold is reduced.
So if you are planning to help a child get on the housing ladder with a gift of €335k, then go ahead.
But if you were not thinking of doing it anyway, then don't do it.
As AAA pointed out, the CAT hit is likely to be low.
Just to be clear on how this works.
If you gift your child a house worth €500k on which you have a Capital Gain of €100k and a CGT liability of €33k
His CAT return would be:
Gift: €500k
Less €335k Threshold A
Less €3k small gift exemption
Subject to CAT: €162k
CAT at 33%: €53k
Less CGT credit: €33k
Net liability of child: €20k
But if you sold a property for €500k and gave him the proceeds, there would be no CGT credit.
Brendan
Do I read this right that fathers CGT liability can be offset by the child in their separate taxpayer CAT calculation? How/why does that work ?
Thanks for comprehensive reply.Yes.
Let's take an example. In the interests of simplicity, let's forget about CGT annual exemptions, small gift thresholds and the CAT Group A, B & C thresholds to understand why a credit would be available.
You acquire an asset for next to nothing - a piece of artwork in a car boot sale. It's subsequently discovered that you have a Picasso on your hands with a market value of €100,000. There's a gain of €100,000 and a potential CGT liability of €33,000 (33% of the gain) if you were to dispose of the asset via a sale or a gift.
You decide to gift the asset to somebody else. The CGT payable by the disponer would be €33,000. The beneficiary would have to pay CAT of €33,000 (33% of the value of the gift) in the absence of a credit.
Therefore on the same event - the transfer of the asset - there is total tax payable of €66,000. Quite a hit.
Therefore, where a transaction gives rise to two taxes, CGT & CAT, the law recognises the double taxation and provides a credit as a result.
More information can be found here:
Capital Acquisitions Tax Consolidation Act 2003, Section 104
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