# Capital gains tax



## pink2006 (12 Oct 2006)

hi there,

purchased a new property and was going to rent it out, but with all the increases in interest rates, were thinking of selling this property its only new and no one has lived in it yet? would we have to still pay capital gains tax.


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## Luternau (12 Oct 2006)

You dont say if this property was bought as an investment property or PPR. If bought as the former, then you will incur CGT liability on its sale.


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## asdfg (12 Oct 2006)

Assuming you bought the property with the intension of letting it and assuming you sell at a profit - Yes. 
Did you pay stamp duty at the appropiate investors rate. 
You can deduct legal expenses auctioneers expenses etc and I think you can also deduct SD. 
Remember you are selling the property second hand and the buyer will have to pay stamp duty at the appropriate rate. You may have to discount the price by the stamp duty to get a sale.

Post crossed with Luternau


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## NorfBank (12 Oct 2006)

Can OP not say that he bought it with the intention of it being his PPR as he has never rented it and then avoid CGT?


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## greenback (12 Oct 2006)

I wouldnt worry about CGT in this case but it may look a bit dodgy to be selling so quickly after buying. The law does state that as long as its your PPR then you will not incur the dreaded tax. There is no timeline as to how long you have to live there. I knew someone recently who had put her property on the market only about 3 weeks after getting the keys. It took about 3 months to sell the place but there was no mention of CGT.


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## Howitzer (12 Oct 2006)

greenback said:


> I wouldnt worry about CGT in this case but it may look a bit dodgy to be selling so quickly after buying. The law does state that as long as its your PPR then you will not incur the dreaded tax. There is no timeline as to how long you have to live there. I knew someone recently who had put her property on the market only about 3 weeks after getting the keys. It took about 3 months to sell the place but there was no mention of CGT.


 
Anyone taking this attitude is, at best, naive. 

CGT is self assessed. The responsibility is upon you to ensure your tax affairs are in order.


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## greenback (12 Oct 2006)

There was nothing out of order in it. All I was saying was that she was only there for a short period of time but it was still her PPR. She was going to move in to her partner's home after the sale


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## Luternau (12 Oct 2006)

The key issue here is for the OP to indicate whether the property was bought as a PPR or investment property. Personally I think that it was bought as an investment property, otherwise the rise in interest rates would not be mentioned as a reason for selling-paying a mortgage is better that going back to renting. If this is not the case, are we seeing the first signs of people being over stretced on mortgage repayments on PPR even before reaching the end of interest rate increases?
If it was bought as inv prop, then its reasonable to assume that Stamp duty was paid. If not then this is a subject for another thread. Any gain on inv property, however short it is owned ,is subject to CGT. Its only 20% (at present) and is one of the fairest of all taxes-its only payable on profit. Very few businesses go bust by making even a small profit!


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## ae6 (13 Oct 2006)

What about if you have contracted to purchase a property and sell before completing the purchase? Is CGT payable when you never actually owned the property?


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## Howitzer (13 Oct 2006)

ae6 said:


> What about if you have contracted to purchase a property and sell before completing the purchase? Is CGT payable when you never actually owned the property?


 
Well you can pay income tax on it instead if you prefer.


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## Luternau (13 Oct 2006)

RE Original post-OP says they were going to rent it, so I assume they actually closed the sale at this stage and are not trying to flip the cntract.


*Re: Capital gains tax* 
What about if you have contracted to purchase a property and sell before completing the purchase? Is CGT payable when you never actually owned the property?

I have a post up on this-see 'Flipping and Tax matters'. Would be keen to hear all your views both on the whether CGT or Income tax applies to gains from the sale of new, unregistered property (ie. selling on before completion). The goods (ie Property) are still new so;
(1) is there a VAT liability on the mark up? I think so-by the way
(2) if the contract is the 'goods', then CGT does not apply to profit from the sale of goods, but income tax does
(3) Is an option to purchase a property, that is then sold for profit before completion, not subect to income tax? i.e the asset was never owned.


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## Luternau (15 Oct 2006)

I had read this on the revenue site. Not convinced an option to buy property from a developer is the same as the examples given. If you think about it, when you sign a contract, you do not own anything. So why should CGT apply?


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## Luternau (15 Oct 2006)

Thanks for that SPC!
Have you read my thread "flipping and tax matters" I would be interested in your comments on my situation (as purchaser)
I have wrote to the revenure-6 weeks ago! No response. Perhaps they are too busy adding up income from stamp duty to worry about trivial taxes such as CGT and Income tax!
This whole area seems ripe for their focus when the current boom in tax takes subsides


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## hairymary (16 Oct 2006)

Can someone please calculate my CGT liability on 2 investment properties based on the following info

First property bought in Nov 1988 for €45,000 (as PPR)
Rented from April 1999 to present
Value today @ €700,000
Second Property purchased in March 1994 for €76,000 (as PPR)
Rented from August 2003 to present
Value today @ €350,000
Is the property still considered to be your PPR for 1 Year after you have vacated it?
Please assume normal legal, buying and selling costs.


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## Luternau (16 Oct 2006)

There is an overlap here from 94 to 99 where you clain to have 2 PPR. You can only have one PPR. Normal CGT rules on PPR cannot apply to two residences for the same period.  
Normal residency ends 12 months after moving out -so you can decuct one year from one of the figures. Indexation also applies up to a few years ago.
I have came accross this link from one frequent poster (Clubman) that may help you in estimating liability. I think you need to get advice on this-the cot of which can be deducted form the gain.
http://www.askaboutmoney.com/clubman/cgtcalc.htm


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## hairymary (17 Oct 2006)

Apologies Luternau,
I should have said "please calculate the CGT liability on each individual property".Sorry about the confusion.Thank you for your help.


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## onyx (1 Nov 2006)

Hopefully some CGT whizzes will find this post  

I bought a house about 12 years ago. I moved abroad for a few years, meanwhile my sister moved in (rent-free). 

I am thinking of selling the house. However, if I stand to lose 20% (on the difference between original purchase price and today's selling price) I fear it may not be financially wise.

Can I claim the place as my primary residence? If not, how many years must pass before I can? 

Perhaps it is not so clear cut - any insights would be appreciated. Thanks y'all!!


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## ClubMan (1 Nov 2006)

onyx said:


> I bought a house about 12 years ago. I moved abroad for a few years, meanwhile my sister moved in (rent-free).


This could be significant - having somebody such as a family member live there rent free on you behalf *may*, as far as I know, allow you to claim _PPR _status for this period of time. But it may also depend on whether or not you bought another property while abroad. It might be worth checking out this angle with _Revenue _and/or a tax expert.


> Can I claim the place as my primary residence? If not, how many years must pass before I can?


 It's not a timeline issue. If the property had been rented out then some portion of any resale gain would be assessable for _CGT _even if you moved back into it as your _PPR_. However this may be a moot point in your case.

As I say you should get independent professional advice.


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## onyx (2 Nov 2006)

Appreciate your response, thank you much ClubMan.


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## ainsie (8 Jan 2007)

Can I thrown another one in the mix, my wife and I seperated for a while and she moved in there. All is good again and now shes back. We are thinking of selling and will have CGT but not sure how much, She was there 1 1/2 years of three.


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## ClubMan (8 Jan 2007)

Your query is not clear. She moved in where? Do you mean that she bought a house as an owner occupier c. 3 years ago and then rented it out after 1.5 years? If so then she is liable for a clawback of stamp duty and then c. (1.5 - 1) / 3 = 17% of any gain is assessable for _CGT_.


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## ainsie (8 Jan 2007)

Thanks,
I'll make it clear.We brought the house as a second house, paid stamp duty,which was small as it was only 201.000 K. Maybe ut was the strain of all the buying , decorating etc, we seperated. She now moved in there for over a year. We got back together and have rented it since.

Now we want to sell.

I'm sorry about this but I usually pick up these things quick but CGT has me stumped big time.
Mainly about the exemptions.

I Think the difference between the buy and sell will be around 180,000
I have spent about 15,000 doing it up. Spent only about 8000 or so on stamp duty at the time and 2000 or so on fees. This time fees should be around 5000.

Whats this about the 12 month exemption, is there some sort of calculation I make to take away 12 months.

So you can see , I'm at the back of the class here. 
Tried reading other posts but still not clear.

Tom


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## ClubMan (8 Jan 2007)

If you paid investor _SD _on the original purchase then no clawback applies.

If you owned it for 3 years and she lived in it for 1.5 then my rough calculations above should illustrate what sort of portion of any resale gain will be assessable for _CGT_.

Then you calculate your _CGT _as per the normal rules (e.g. deducting previously incurred capital losses if applicable, any allowable expenses, your annual _CGT _allowance etc.). _Revenue _[broken link removed] this but if you still don't get it then get independent, professional assistance with your _CGT _return.

HOWEVER! If you remained married albeit temporarily separated you would need to check that you were considered two single individuals for a period of time and that the tax treatment outlined above applies. I'm not sure. Basically a married couple normally can only have a single joint _PPR _so I'm not sure what happens in the case of a temporary separation.

In my opinion you should get independent advice on this.


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