Tax implications of property swap with siblings

[kid Curry]

Hi

Im a first time poster and was hoping that someone here can give me some info as regards any potential tax implications or pitfalls of the following scenario:

My Mother passed away a few years ago and left her estate to her six children equally. That estate consisted of her home and a bit of land, a yard actually, in Dublin city centre. We all inherited our 1/6 of the estate which was fine.

I have lived in the family home for 18 years with my own family and my mother lived with us. I agreed with my other siblings that we would swap my interest in the yard for their interest in the house so that the outcome is that I own the house outright and in exchange I have given up my share of the yard.

As I am a first time buyer I understand that Im exempt stamp duty however will I be open to capital taxes on my share of the yard that I swapped to my siblings, as I've been told that revenue will "deem" this to be a sale of my share in the yard which Im really hoping is not the case.

 

[CXC]

Not a solicitor or expert on capital acquisitions tax, however I see it as follows:

1) On the original division of the assets by the solicitor, assuming the will said that each of you were to get 1/6th share of the house and 1/6th share of the land, then the solicitor should have suggested that you all could have availed of an option to "disclaim in consideration". Assuming house worth 600k, and land worth 300k, Effectively you would end up giving your 50k share in the land for receiving an equivalent 50k share in the house, but the disclaimer in consideration could have been extended to adjust for the monetary value. This would then have left you in the position of having full ownership of the house plus a cash adjustment owing to your other siblings of say €450k using the above example),. Unfortunately its too late to effect a disclaimer for consideration once the will in finalised. However this was an obvious point which your solicitor should have discussed with you.

2) The disposal now of your share in the land, and your siblings share in the house is a disposal for Capital Gains Tax purposes (and possibly capital acquisitions tax if the values do not match). If the will was only administered a few years ago, then perhaps the land values and house prices may be favourable in doing the swap - i.e. there may be no "gain". Also you will need to consider stamp duty.

Kieran Coughlan, Tax Manager, CXC

 

[Joe_90]

Hi,
The Revenue consider your swap to be a disposal between connected parties.
You are disposing of your 1/6 interest in the yard for their 5/6 interest in the house.

CGT on yard.
So say that the yard is now valued at €300,000 you have deemed proceeds of €50,000 compare this with the value at date of inheritance if its less you have a loss.
CGT on House
Say that the house is now valued at €600,000 the other 5 have deemed proceeds of €500,000 compare this with the value at the date of inheritance if its less they have a loss.

Capital Acquisitions Tax.
As you are acquiring an asset worth 500k for 50k you have a gift of €450k.
But there is an exemption S86 of the Capital Acquisitions Tax Consolidation Act. The gift of a dwelling house and up to one acre occupied by the donee (receiver) as his main residence for 3 years prior to the date of the gift will be exempt. One slight issue might be that the donee must not have any other dwelling house.

Stamp Duty.
S 92B SDCA 1997 deals with first time buyers relief. I first time buyer(purchaser) is someone who has not previously purchased a house. There is a question whether the gift of the 1/6 share would be deemed as a "purchase".

Hope this gives a little guidance and if anyone knows if Section 92B applies please let me know. S92B (1) (II) excludes voluntary dispositions but does this included dispositions under a will or inter vivos.