# Buying a house for below market value from partner's parents - what taxes?



## GrizzlyAdams (11 Aug 2014)

Hi all.

I've a fairly complicated question regarding buying a house.

Myself and my partner have been looking for a house for the last few months. She is an only child and her parents want to downsize their current house. They suggested we purchase it from them for below the market value (and they use what we pay them to buy a smaller home for themselves for cash). They say it makes sense as the house is left to her anyway and they can no longer maintain it.

The house is valued at around €450,000. They have suggested we buy it for around €250,000 (give or take depending on new house)

My questions is what type of tax would we have to pay on this? CGT, CAT, Gift Tax etc?

Or what is the most cost effective and legal way of transferring the house to myself and my partner? (Taking into account that they would need the €250,000 from us to purchase their new home as they're both retired - this figure would require a joint mortgage from ourselves)

I'd really appreciate if anybody could help me figure this out or point me in the right direction, I've been trying to figure it out and I've just made myself more confused 

Thanks

PS: Alternatively, would it be possible for her parents to gift her their home (and later put my name on the deeds); and myself and my partner purchase the smaller home for her parents??


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## dereko1969 (11 Aug 2014)

This is a minefield, you should really be talking about this to your solicitor.

Where is your €250k coming from?


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## GrizzlyAdams (11 Aug 2014)

Yeah, hoping to do that soon but just want to get a fair idea of what way to approach situation - if at all.

Her parents are very keen to do this - I'm just worried that taxes etc.. would not make it a feasible option.

The €250,000 would be from a mortgage - we have approval for a little over €300k


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## Zacchaos (11 Aug 2014)

Grizzly,

Essentially if you go through with sale at undervalue you will have a deemed gift of €200k going from parents to your partner - it may be possible for your partner to receive this gift without paying CAT as it's under the current parent to child threshold of 225k (depends if she has received any other gifts from parents in the past).  The house would need to go into her name to avoid any gift element to you.  As far as I know, the mortgage can be in joint names without CAT implications.

Parents need to consider CGT - deemed sale price of 450k - may have CGT implications if the house has not been their principal private residence for the entirety of their ownership.

Stamp Duty will also need to be paid... 1% - not sure if it's on purchase price or market value.

There is a dwelling house exemption, where a house can be gifted exempt from CAT where certain criteria are met - this can be a very valuable relief and is something that may work with careful planning.  It would be particularly important to investigate this avenue if there was a likelihood of further gifts/inheritances from her parents.

As dereko1969 said - talk to your solicitor and take separate professional tax advice if your solicitor is not familiar with this area.


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## Brendan Burgess (11 Aug 2014)

*Option 1 - You and partner buy house for €250k i.e. €200k under value

*You will be deemed to have received a gift of €100k and so will pay CAT of €33,000 on it. 

I don't think you will avoid this by putting the house in your partner's name only. Even if it does work it's risky - you would have a mortgage for a house you don't have any entitlement to. So if you split up, you would be in trouble. 

*Option 2 - You and your partner buy the house for €450k with a mortgage of €250k and a gift to your partner of €200k.  
*You will own 28%  (125k/450k)  of the house. 

*Option 3 - The parents simply sell their house on the open market and buy a house for €250k. 
*They gift your partner €200k which she puts towards the house you want to buy.

*Option 4 - You and your partner buy a house jointly which  you let to her parents. 
*They let theirs to the two of you.   

*Whatever you do, you must do an agreement for what happens if you and your partner split 
*As you are bringing less to the table, you should bring this up. She might not want to.  It might not be romantic. But it solves so many problems later if you do split.


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## GrizzlyAdams (11 Aug 2014)

Thanks Brendan and Zacchaos,

Really helped clear that up for me a bit in my head.

The option you mentioned regarding half gift and remaining in a joint mortgage seems like the best route. If we were to ever split up it wouldn't be fair for myself to get a 50% share in the property anyway unless I paid that, as it is her family home at the end of the day.

We've booked a meeting with the solicitor for during the week 

I'll keep you posted


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## mandelbrot (11 Aug 2014)

Brendan Burgess said:


> *Option 1 - You and partner buy house for €250k i.e. €200k under value
> 
> *You will be deemed to have received a gift of €100k and so will pay CAT of €33,000 on it.
> 
> ...



Option 1 with the property in joint names is catered for (para. 19.16 of the link), provided it's done correctly:
[broken link removed]

By this I mean, the parents want to sell the property to their daughter solely, and it is conveyed subject to her coming up with 250k (ie a gift element of 200k), but since the bank will only lend that amount on a joint mortgage then she has to transfer an interest to the husband to satisfy the bank. In that case, the 200k gift is to the daughter, and the subsequent transfer by her isn't caught by gift-splitting provisions.


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## Joe_90 (12 Aug 2014)

Mandelbrot

 The OP refers to partner as distinct to spouse.

Does this provision apply?


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## Steven Barrett (12 Aug 2014)

GrizzlyAdams said:


> Thanks Brendan and Zacchaos,
> 
> Really helped clear that up for me a bit in my head.
> 
> ...



It will be your new family home if you buy it. 

I fully understand where you are coming from and if you do split, you probably won't want to live there anyway, but don't leave yourself wide open. Have some sort of agreement in place as to what you get if you do break up. 

Enough negativity, best of luck with it. Make sure you get tax advice on it first to ensure all taxes are paid and everything is in order. 

Steven
www.bluewaterfp.ie


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## mandelbrot (12 Aug 2014)

Sorry, my bad, that will only apply to a married couple, because the second gift is the transfer from sole name of the child to joint ownership with their spouse/partner - no CAT if they're married and Class C threshold if not married.


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## GrizzlyAdams (18 Aug 2014)

SBarrett said:


> It will be your new family home if you buy it.
> 
> I fully understand where you are coming from and if you do split, you probably won't want to live there anyway, but don't leave yourself wide open. Have some sort of agreement in place as to what you get if you do break up.
> 
> ...



Thanks Steven

I spoke with solicitor the other day over the phone (meeting later this week) and he recommended  the best route would the gift of €175 - 200k to my partner and then we jointly  get a mortgage for rest of the house.

I'm happy with that and so is my partner and her parents. It seems to be the best route and means we aren't stung with a huge tax bill straight off the bat. It means, (Depending on Official Valuation which bank is carrying out in 2 days time) I'll have around a 30% share in the house (until we get married I think?)

Either way, all progressing nicely. Really appreciate the help here, as a first time-buyer doing it in a roundabout way the whole thing has been fairly daunting!


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