I won't don't worry
Buying home off parents at below market value
- Thread starter kevin306
- Start date
It seems like an accountant would be best served for this rather than my solicitor
That is true, but the purchase agreement as it stands won't make a whole pile of sense if my father is met with a tax bill for half the amount he sold the house for so this is the most important thing for me to get clarity on first.
I'm pushing my father to meet his solicitor and get the ball rolling (notoriously slow at doing anything), he hasn't as of yet though.
You can't do that. OP just asks the solicitor the relevant questions based on the advice he received on here. He could also contact an accountant !
1. Correct
2. Wrong
Transfers between spouses are free from CAT and CGT but the recipient is assessed as having paid the original price paid by the donor spouse - in other words, the price the father paid for it not the value when it was transferred
Didn't bother with the rest
2. Wrong
Transfers between spouses are free from CAT and CGT but the recipient is assessed as having paid the original price paid by the donor spouse - in other words, the price the father paid for it not the value when it was transferred
Didn't bother with the rest
Your father will have a tax bill when disposing of the house, regardless of who it goes to.We have made this practically our family home and love it. Looking on daft the current house market, we would get nothing similar unless spending much more.
Just seems crazy that a parent doing a good deed such as selling the house to his son for much less than market value is hit with such a tax after already paying an inheritance tax on the house already.
It seems there is no way of him selling the house at the much reduced rate and avoiding the CGT tax. That much is 100% even though my solicitor explicitly told me that was not the case
The part of the value that he's already been taxed on (€70k) isn't subject to CGT on disposal, only the increase on value, thus making the application of tax "fair".
As an ex-Revenue man, I'm impressed by your in-depth knowledge of how we serve our customers.
T McGibney
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What I said is true all the same. I wish it wasn't.As an ex-Revenue man, I'm impressed by your in-depth knowledge of how we serve our customers.
But to be fair that increase in value is not of any relevance to him as he is not gaining from it by selling it to me at such a reduced cost. Just seems very unjust.
If it wasn't that way, everyone would seel property to their family for less than it was worth. Or just declare that the sale price was less than it actually was.
The substance of the transaction is that the house is being sold to you at market value, while a simultaneous gift is being made to you.
He is though. But he is gifting that gain to you so he doesn't see it. If he sold on the open market and gave you the cash, would it feel the same? Because under the tax calculation it is treated as the same.
There is a gain there all the same. And you are benefiting from that gain. You're getting a house worth 170K for 60K.
Original Price 80K, plus costs, renovation 30K, so you're at costs of about 110K. Value 170K. Costs of solicitor 5K. Very round numbers, so a gain of about 55K maybe. Tax would be 33%. Around 18K minus the personal exemption.
Now if I were your dad I'd want you to be paying the tax. So you and your wife could instead gift your dad annually 3K each. Which is 6 K Takes 3 years. Is there a mother here somewhere? She can be gifted the same. So it's faster.
I think you need to take one step at a time.
1. Transfer from dad to you. CGT is dealt with.
2. Your receiving a gift of 170K minus 60K = 110K gift, but you said you'll never reach the inheritance threshold so that's fine.
3. How to pay the 60K. Do you have it?
4. Gift the tax of 18K back (I'm assuming your dad can pay it but wants to be reimbursed)
5. Renovation, when house is in your name, go to bank with value of 170K to get 100K.
Receipts re CGT
You asked a specific question. The rule is you must keep records for 6 years. The best advice though is to keep them in case of need. In the absence of receipts bank withdrawals would be good. But a reasonable amount such as 30K for an extension shouldn't lead to any problems.
Your solicitor clearly is not able to deal with the tax aspects. But it's not helped by you not understanding that there are different strands to this. So you need an accountant who can work thru the best scenario for you all.
T McGibney
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Why would they go to all the bother of doing this? A simple contra would be immeasurably simpler. 1. Dad gifts child a property, in exchange for 2. Child gifts dad a monetary sum to pay the CGT. The net gift is 1 - 2.
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Regarding the money my father spent on the renovation. If it was longer than x years is it mandatory to show receipts to prove the work was done?
torblednam
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That'd be an ecumenical matter!
In Revenue's view, yes, in the first instance, they'd expect that any amount that a deduction is being taken for in computing CGT, ought to be capable of being verified.
I seem to recall a curveball decision by a temporary Tax Appeal Commissioner several years ago, who took the view that enhancement expenditure incurred more than 6 years (which is the statutory record retention period) prior to the year of disposal, didn't need to be evidenced by receipts. I don't know if there was some other nuisance at play in that case, but Revenue certainly do not accept that as the correct view of the law.
Having said all that, if money was clearly spent, then in my experience it's normally a question of agreeing what's reasonable, in the situation where there's a deficit of records.
Sorry to bring this up again, but could this potentially avoid the Capital Gains Tax that my parents will owe???
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