Buying a house – potential for gift tax liability?

[mostlikely]

My grandmother died earlier this year. One of my aunts and my uncle are executors to the will. The house was willed to my grandmother’s six children (my father along with his brother and four sisters). The six of them had a meeting to decide what to do with the house. It was agreed to give me and my wife first refusal on the house.


When my grandmother went into care 2 years ago, the house was valued by an auctioneer at 180k as part of the fair deal process.


My wife and I thoroughly checked out the house and offered what we believed was a fair price of 200k. The family accepted. It is the executors intention that the house be transferred directly to me and my wife from my grandmothers estate thereby saving the need to transfer to the family and the associated conveyance fees.


In the background to this the probate process is underway. For the probate process the house was valued at 280k. When I told our solicitor this he said that given the disparity between this valuation and the accepted offer, the balance could be seen as a gift which creates a tax liability for me and my wife.


I have been lead to believe that auctioneers sometimes inflate valuations for probate to remove any chance of a tax liability for those the house was willed to, in this case my father and his brother and four sisters.


My question is: could there be a tax liability for me and my wife?

How could Revenue become aware of it?

How can we avoid the tax liability?

Or is our solicitor unnecessarily worrying us?

 

[Gushering]

Get an independent valuer to inspect the house and provide you with the open market valuation of the property at this point in time, because this whole issue centres around differing valuations of the property. If you picked the 200k figure simply based on your own judgement, there is a greater likelihood that it could be questioned by Revenue.

Having an independent valuation done (separate to the one obtained by the executor's solicitor) will help back up your argument that the house is only worth 200k (if that actually is the case) and that you have paid the full market value and hence no gift was given.

Also, be aware that if the 80k difference is actually being "gifted" to you by your father, aunts and uncles that the tax-free threshold for gifts from your aunts and uncles will be much lower than that for your father. You are more likely to have a tax bill on the portions being gifted by your aunts and uncle as a result.

However you really need to get full independent legal advice on this situation.

 

[mf1]

"I have been lead to believe that auctioneers sometimes inflate valuations for probate to remove any chance of a tax liability for those the house was willed to, in this case my father and his brother and four sisters."

Unlikely - it is more likely that the house is worth 280K.

"My question is: could there be a tax liability for me and my wife?"

Yes

"How could Revenue become aware of it?"

From the Inland Revenue Affidavit filed for Probate with the valuation and from the stamp duty return ( with PPS numbers and LPT i.d. ) if you go ahead

"How can we avoid the tax liability?"

Work out whether you have one first and then get proper advice - see Gushering's post above

"Or is our solicitor unnecessarily worrying us?"

Yes - that's what we're put on this earth to do.

mf

 

[dereko1969]

Is it not more likely that the house was undervalued for fair deal rather than over-valued now?

 

[Joe_90]

If the value is €280k and you pay them €200k then there is a gift of €80,000.

So stand back for a minute the first €3,000 of gifts is exempt so 6 x €3,000 so €18,000 is exempt. If it's to yourself and your wife then it's €36,000.

Uncle and aunts theshold is €32,500 non blood relative is €16,250.

So you have a gift of €40,000 €18,000 is exempt and the balance is under the threshold.

Your wife has a gift of €40,000 €18,000 is exempt with €16,250 covered by the threshold so €5,750 taxable at 33%.

 

[mostlikely]

Thanks for the advice guys.

The house is not worth 280k. An engineer has done a detailed survey for us and has estimated there is 70k required to modernise and repair. The most recent sale in the area for a similar property was 260k and that was in turnkey condition. This one is not.

We're doing some more investigating as to how the 280k valuation was arrived at. Hope to have news in the coming days.

 

[john luc]

My experience of house values for probate was in 2013 and when the valuer came to inspect the house she asked me what value I wanted on it.