Buying a house below market value (not a family member) Problems and Benefits?
- Thread starter Mink_uss
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Sounds, to me, like there's a potential gift tax issue there alright. I'm not a tax expert though.
Gift and Inheritance Tax (Capital Acquisitions Tax – CAT)
This page gives a general overview on CAT implications on gifts and inheritence.
www.revenue.ie
NoRegretsCoyote
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There is a healthy debate (see thread above) as to whether you are liable to pay CAT on the difference between market value and transaction value.
For sure the vendor should have used the market value if there was a capital gain on the property and it wasn't their PPR. But that is their business, not yours.
T McGibney
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That debate is subtly different from the latest query. In the original query, a totally unconnected stranger in an open market agreed to a particular sale price with the purchaser. I queried the suggestion that the apparent discount on the anticipated market value represented a taxable gift on the part of the vendor.
This case appears materially different to that one. "A wealthy family friend" has clearly and purposely conferred a gift on @Robzig . As such it's clearly a taxable gift.
Agree.
NoRegretsCoyote
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Not quite.
They are within the OP's social circle and considerate to the point where they will give them a five- to six-figure discount on a house.
I am not sure how Revenue would be supposed to know the difference between a "family friend" and a "friend of a friend" in the circumstances, or how on earth a taxpayer would prove the difference. These definitions are pretty subjective and unfalsifiable. If I worked for Revenue the circumstances of the two transactions would look identical to me.
T McGibney
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T McGibney
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No point in rehashing old ground here, but there's no indication from the OP that the vendors are within the their social circle.
Secondly, it's clear from the opening post
that the vendors regard the true value of the house as at or around its asking price.
And if you worked for Revenue, your original assessment of the circumstances of each transaction would be neither here nor there. It would the facts of each case that would be the determining factor.
T McGibney
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No, what matters is the actual market value of the house.
Initial perceptions are irrelevant.
If the vendors are underpricing their property as an act of charity or sympathy in favour of the purchaser, then of course the difference represents a gift. But otherwise, I'm not so sure. Obviously the precise circumstances of each transaction determines its taxation treatment.
NoRegretsCoyote
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Which would be to all intents and purposes identical in Revenue's eyes. Two parties with a social connection trading a property at a below-market price with full knowledge. The motives of the vendor in either case are impossible to prove or disprove.
T McGibney
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If the vendor can coherently justify the price they're charging, then data relating to other properties is neither here nor there.
Looks like we have a big prob. I thought that our case was very similar to the original case for a number of reasons. I don't really understand why different advise is now been given. I think the best thing for me to do is to talk to an accountant. I will also talk to the vendor. Hopefully, he can justify the price he sold us the house for.
Who advised you originally and what did they advise?
I get what you're saying here and fully agree.
That makes complete sense. You definitely need to get professional advice here. Do you have an accountant? How approachable will the vendor be about all of this?
T McGibney
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Comments here do not constitute advice and never should be relied upon as a substitute for professional advice.
Thanks Jimmy,
Good to hear that someone understands what I was trying to say!
I was really worried sick but I had a quick call with the vendor earlier. He told me that there's no need to panic at all and that he'll go through all the details when he gets back from his holidays. What a relief. I hardly slept the last couple of nights.
Good to hear that someone understands what I was trying to say!
I was really worried sick but I had a quick call with the vendor earlier. He told me that there's no need to panic at all and that he'll go through all the details when he gets back from his holidays. What a relief. I hardly slept the last couple of nights.