# CGT/CAT on gifted and subsequently sold property



## zenzen (14 Feb 2014)

Any ideas on the following scenario - I thought I wasn't liable for tax but I am concerned now that I may somehow be liable. Gifted site 8 years ago from the folks. Intention to build which for various reasons couldn't go ahead. Sold last year for less than half the price it was valued at when it was transferred to me by my parents. Never occupied by me in this period. I thought I wouldn't be liable as the value of it had fallen and not gone up, but not sure on this - can anyone with greater knowledge clarify?


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## Brendan Burgess (14 Feb 2014)

When you got a gift of the site 8 years ago, you would have been liable to Capital Acquisitions Tax. However, if it was worth less than the then threshold, around €440k at the time, if I remember correctly, there would be no CAT payable.

If it has fallen in value since then, you are not liable to CGT.  As it was not your Principal Private Residence, then the loss of value would be a capital loss which you could carry forward against future capital gains. 

I don't know if there is anything strange about sites being gifted and later sold which affects the above general rules.


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## vectigal (14 Feb 2014)

Would your parents have claimed a CGT exemption on the transfer of the site to you? There is a an exemption in relation to land transferred to a child to enable them to construct a home. Following info from Revenue.
​_"If the child subsequently disposes of the site without having occupied a principal private residence on the site for at least three years, then the capital gain which would have accrued to the parent on the initial transfer will accrue on the child and a clawback of relief will arise."_


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## zenzen (14 Feb 2014)

Thank you both for your replies, much appreciated. The text above has me concerned that I may in fact be liable for tax - but I don't fully understand what it means. When my parents transferred the site there was no claims or forms lodged with the revenue - should something have been lodged at this stage? I have asked them and they said they never lodged any returns/forms nor were they advised to. I never received money or gifted property prior to this, nor have my parents gifted anything to anyone besides the site. I have looked this up on revenue before posting but was confused about the situation, in some areas it says you are entitled to be gifted money under a certain threshold from your parents, which the site value would have been well under, but do they differentiate between land and cash?


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## Joe_90 (14 Feb 2014)

You need to get the issues clear in your own mind first.

1.  Capital Gains Tax: When your parents transferred the site to you it is a disposal for capital gains tax.  If the had a gain on the disposal there may be relief due to:
A. Indexation relief 
B. Retirement relief 
C. Transfer of a site to a child relief.

They should have made a CGT return on the disposal of a capital asset even if no tax was due.

2. Capital Acquisitions Tax: When you received a gift from your parents it is valued at market value on the date of the gift.  If it was under 80% of the threshold at the date of the gift you are not required to file a CAT return.

So you need to establish if your parents relied on the site to child relief to get relief from CGT because if they did then the tax will fall on you.

If they are farmers the may qualify for retirement relief either way.


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## zenzen (14 Feb 2014)

No we are not farmers, they just had purchased another site which they were planning on building on and moving into, changed their minds and gifted it to me instead. When it was transferred over the solicitor advised us as it was valued under 105k there would be no "gift tax". My parents definitely didn't make a cgt return as they weren't even aware of needing to do so. I have no idea how to find out if they had a gain? Does that just mean if it went up in value? It was purchased in the early 90's so went up by a big degree in the boom when it was transferred to me, and I sold it for a third of the transfer value recently. Very confused about the whole issue.


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## Joe_90 (14 Feb 2014)

Well someone has a problem.  If your parents claim that the relief applied you have a CGT liability.

Did you pay stamp duty on the transfer?

You need to establish when they bought it and for how much and see where you stand.


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## vectigal (14 Feb 2014)

Find out what your parents paid for the site add on their costs of purchase (inc stamp duty) index it from the year of purchase to 2004; this will give your their gain.  You sold the property for 1/3 of the €105k (what was it net of sale costs) and in so doing have incurred a loss.  You may be able to set this loss v any gain that your parents may have had that is now accruing to you. Might be advisable to get some professional tax advice re this situation.


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## Joe_90 (14 Feb 2014)

vectigal said:


> .  You may be able to set this loss v any gain that your parents may have had that is now accruing to you. Might be advisable to get some professional tax advice re this situation.  ]



Interesting idea do you have the section that allows the carry back of capital losses.


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## vectigal (14 Feb 2014)

Good point. The section in question 603A (3) TCA seems to indicate that the gain that would have been due by the parents shall be treated as accruing to the child at the time of their (the childs) disposal of the land. So not really a carry back.


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## Joe_90 (14 Feb 2014)

Very interesting 

The gain shall be treated as accruing to the child at the time of the disposal referred to in paragraph (a)

So that appears to say that the gain accrues in the same year as the disposal and therefore is the same year as the loss so one can be offset against the other!!!  Nice spot bud!

So now the question is does Section 603A apply where it has not been formally claimed???

OP did you pay stamp duty on the transfer or was it exempt under the site to child relief?  If you paid no stamp duty then it would support the arguememt.


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## vectigal (14 Feb 2014)

So now the question is does Section 603A apply where it has not been formally claimed???

Nothing to stop parents submitting CG1 now and claiming relief; cant see any time limits in section


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## Joe_90 (14 Feb 2014)

Ok I'll accept that, so OP you need to establish the original cost, you know the value it was transferred to you at. Compute the gain.

You know what you got for it and what it was transferred for.  Compute the loss.

Take the loss off the gain deduct €1,270 and compute the CGT and see where you are.

I would seek specific advice prior to any submission the the tax office.

On a different angle there seems to be a substantial difference between someone who makes a tax return and paid the CGT on disposal of a site to a child then after 5 years realises that the tax was not due and can't get the tax back and someone who ignores the requirement to file a return altogether!


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## zenzen (14 Feb 2014)

I never paid stamp duty - not sure what the reason but the solicitors letter simply said it was exempt. When the site was transferred to me my parents never submitted a CAT form for asset disposal, and therefor never claimed tax exemption based on the site being transferred to their child. So I am wondering now that the site has been sold, does the tax due still fall to me or does it fall on them since they never filed a cat form looking for the exemption?


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## mandelbrot (14 Feb 2014)

vectigal said:


> So now the question is does Section 603A apply where it has not been formally claimed???


 
Yes, it's a relief that applies regardless of whether it is claimed or not.


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## zenzen (14 Feb 2014)

So if the parent now realising the bill that has arisen for the child and wants to not claim the cat relief as they never did so formally anyway, they cannot take responsibility for the tax bill? It is forced to the child on disposal, is that correct? What a mess! Do they allow you to pay it back over a number of years or must it be immediate? It would be overdue now as well.


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## mandelbrot (14 Feb 2014)

What CAT relief? If there was a CAT relief it would apply to you (CAT is owed / paid by the recipient)


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## zenzen (14 Feb 2014)

sorry should have said cgt i think, i was referring to the info in Section 603A quoted above.


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## vectigal (14 Feb 2014)

Don't panic, get all info re your parents gain on the transfer of the site to you; then calculate your loss on the sale of the site. See then where you stand.


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## Joe_90 (14 Feb 2014)

OP you need to establish the original cost multiply it by the indexation factor, you know the value it was transferred to you at. Compute the gain.

You know what you got for it and what it was transferred for.  Compute the loss.

Take the loss off the gain deduct €1,270 and compute the CGT and see where you are.

It appears that the liability arises on you.


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## zenzen (14 Feb 2014)

Unfortunately they bought it in the early 90's for a "token" amount from my mothers friend, so the difference between what they paid for the site and the value it was when given to me is around 100k. Which seems to make a quite substantial tax bill. So they were as good as gifted the site originally too as they didn't buy it for market value. So bought for 600 pounds in 1991, transferred to me with value 100k 2006, sold by me 42k 2013. I am panicking a bit and am truly grateful for the help I have received here.


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## mandelbrot (14 Feb 2014)

So your parents made a gain of about 99k on transferring it to you. This is deemed to be a gain made by you in 2013.

You've made a loss of 58k.

So there's a net gain of 41k made by you in 2013.

Tax was probably due a couple of months ago, of about 13k, so you should pay it asap, and you'll need to file a return by October, but if you've calculated the tax you may as well just file the return and payment at the same time.


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## Joe_90 (14 Feb 2014)

Ya it's about that.


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## vectigal (15 Feb 2014)

zenzen said:


> Unfortunately they bought it in the early 90's for a "token" amount from my mothers friend, ...... So bought for 600 pounds in 1991,.


 
What would the open market value of the site been when acquired by your parents in 1991?


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## zenzen (16 Feb 2014)

"What would the open market value of the site been when acquired by your parents in 1991?"

I have no idea to be honest. It's a very small site in the countryside but a good well connected area, not isolated but it was only an eight of an acre! So it wouldn't have been worth much really back in the day I imagine but I have literally no idea?


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## mandelbrot (16 Feb 2014)

zenzen said:


> "What would the open market value of the site been when acquired by your parents in 1991?"
> 
> I have no idea to be honest. It's a very small site in the countryside but a good well connected area, not isolated but it was only an eight of an acre! So it wouldn't have been worth much really back in the day I imagine but I have literally no idea?


 
In which case the amount they paid for it will probably be all that Revenue will accept the market value was at the time. Particularly since the person who they bought it from wasn't connected. £600 was probably about right for what was a small piece of agri land.


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## zenzen (16 Feb 2014)

What would have happened if it was a house that was transferred to me, not lived in by me after the transfer, not rented out and then sold on? Just curious if the same laws apply or is it different?


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## Joe_90 (16 Feb 2014)

Your parents relied on the provisions of S603A of the TCA 1997 to avoid paying Capital Gains Tax on the increase in value in the site from 1991 to 2006.

You relied on Section 83A SDCA 1999 to avoid paying stamp duty on the transfer.

You did not pay Capital Acquisitions Tax on the transfer as it was under the threshold.

Now if you were gifted a house by your parents they would have been subject to Capital Gain Tax on the gain based on market value unless the property was their PPR.

You would have been subject to 1/2 rate stamp duty on the market value.

You would have qualified for an exemption from CAT but would have to occupy the property for 6 years to keep the exemption.


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## zenzen (16 Feb 2014)

Would the child qualify for an exemption for CAT anyway as it was parent to child gift from catagory a and no other gift had been made and it was under the threshold? Presume the 6 year rule would only come into play if it was over the threshold? Going to see a tax consultant week after next to help me get the paper work together and will give the tax man back his slice of the pie!


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## WindUp (12 Oct 2016)

Apologies for resurrecting an old thread; but can anyone advise where on the CGT form you include the clawback of the relief claimed on the original transfer of a site from parent to child?


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