Buying a house from a brother for less than market value

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chippengael

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If I were to purchase a house from my brother for 50% of the market value, my understanding is that I would have to pay gift tax on the difference. Does my brother also have to pay CGT on the difference, if though he makes no gain on the transaction? Thanks
 
CGT for your brother. Tax rules will treat as sale at market value. Stamp duty for you on market value amount. CAT for you. Potential credit against CAT for you for CGT paid by your brother on same event.
 
Is it your brother's principal private residence? If so, no CGT applies.

Otherwise, he will pay CGT on the difference between the market value and the purchase price.

Brendan
 
Thanks for that. It's a bit unfair that the brother is exposed to CGT given that he is not gaining anything!
 
chippengael said:
Thanks for that. It's a bit unfair that the brother is exposed to CGT given that he is not gaining anything!
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He is gaining an increase in the value of the house (assuming that's the case). The fact that he decides to give the increased value to you makes no difference to the Revenue Commissioners. However, the CAT that applies to you can be offset against the CGT paid by him (see here). If you want to make it so that you pay the tax instead of him, just tune the purchase price up from 50% of the value until you hit whatever you both agree covers his costs.
 
Thanks for that. I followed your link and was interested by the following: "If you have received a gift or inheritance on or after 21 February 2006 and you sell it within two years, the credit will be clawed back." So if I sold the house within two years - or more likely - asap, what would happen?
 
As it says -- if you got relief from CAT because of your brother's CGT you'd have to pay it back. The relief is to avoid double taxation on a single event. In the normal course of events, people pay tax on their income and gains, and beneficiaries of gifts have to pay tax on them even if the gift is something that has previously been taxed. The clawback is to prevent you exploiting a loophole. Gifting a house just so you can sell it on immediately for cash would be tax evasion.
 
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