Buying in-laws out of family home

In relation to rent free properties and the annual 3K tax free, this is of course doubled if it's 'rent free' from mum and dad to son and girlfriend. Giving 12K rent free.

As per this articleL

Will son and his girlfriend face a tax bill if we let them live rent-free in our second home?

We have a three-bedroomed semi-detached property which we have rented out for the past 18 years. The lease to the most recent tenants has now expired and we have decided to allow our son and his girlfriend move into the house.
www.independent.ie
 
Going back to livign rent free in the family home there is this thread where 2 of us posted on before.

Tax due if lived rent free in mothers house

Can anyone advise if there are tax implications if the beneficiary of a will has lived rent free in the house for a number of years? In this case the property was left in equal share to a number of family members. However one of them who was not working or claiming social welfare lived in the...
www.askaboutmoney.com

See post 10
 
The Law

‘How does Revenue view adults living rent-free in parents’ property?’

Q&A: ‘Our daughter is living in an apartment we own’
www.irishtimes.com

The 2014 Finance Act tightened the rules and now the only support parents are allowed offer adult children tax-free is the option of living in the family home, funding a child's wedding costs (but not the honeymoon) and providing accommodation away from home rent-free to a child under the age of 25 in recognised full-time education.

Everything else is seen as a taxable gift and will reduce her inheritance tax threshold.

The above applies to the OP, so there is no tax liability for living rent free in the family home it would seem to me.
 
Bronte said:
That doesn't sound right to me. I think the standard is 3 valuations and you add them up and divide by 3 to arrive at a fair valuation.
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I queried it because I've never seen it done this way before, and I've worked in the area of tax for over 30 years.
 
Dear Brendan,

All you had to do, as the most experienced poster and site owner was to accept that my point is actually correct - see link - how about you do that? OF COURSE she could buy it at ANY price she likes, however pointing this out as you did confuses the matter . The reality is that IF she did she would be in bigger trouble than she already is. I can CHOOSE not to pay income tax, but the consequence of that will catch up with me. Thats what I was pointing out, thats correct and it still stands. You could have outlined that of course when you corrected me but you chose not to. The correct position is my position plus the informatin in the link I posted. You chose to ignore that and be pedantic. So yes, She can of course buy it for €1 if she wants but Revenue wont see it that way and thats what I was pointing out.
Also, your solution as proposed ignored the gift/ benefit of living in the house for this long which taken into account would have substantially altered your solution by negating the savings of transferring because the cost of free use would be greater. There is a difference between fact, opinion, the law and Revenue treatment, most posters on here need a hand negotating these.
 
What was your point with this? They are both over 25 and treating it as their PPR with no formal carers relationship laid out.
From a rental benefit point of view:

Lets say the rent at market rate is €1000.
Thats €12,000 a year x 15 years. (would have to adjust for lower rent in earlier years etc. inflation)
Thats €180,000 in 'gifted' free use.
They can both get €3,000 each a year from the MIL - €6000 x 15 - €90,000 ( Revenue prefer to have this formally arranged so it goes to a bank account monthly etc so it can be demonstrated - but there is no filing obligation on Small Gifts Allowance)
So their joint gift of free use is now €90,000.
Either way there is a free gift here.
Thats seperate to the house transaction which would be assesed by value at the market valuation currently.
Bear in mind that the gift was not declared so interest and penalties would apply plus legal and specialist tax advice. (My tax advice cost me €16k)
 
Bronte said:
That doesn't sound right to me. I think the standard is 3 valuations and you add them up and divide by 3 to arrive at a fair valuation.
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That is the case. In fact you can submit just one valuation and Revenue can have their own valuation done if they require.
 
Hi John

I think you misunderstand the advice you have been given and so you are advising her incorrectly.

JohnDoyle1973 said:
OF COURSE she could buy it at ANY price she likes,
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JohnDoyle1973 said:
I can CHOOSE not to pay income tax,
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This is a completely false comparison. Choosing not to pay income tax is tax evasion. It is illegal. The penalties are severe.

There is nothing illegal or wrong with someone selling their home to someone else at more or less than the market value. It's done all the time. It would be wrong to declare the value at €90k if it's worth €300k. But I have made that absolutely clear.

Brendan
 
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JohnDoyle1973 said:
There is no formal carer relationship there. THere would need to be one in place.
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I don't believe you need a formal carer relationship at all. It's enough it's the elderly mother in her own home. All that matters is they are in the family home, which is treated differently to giving your spare home in D4 to your son or daughter rent free.
 
JohnDoyle1973 said:
There is no formal carer relationship there. THere would need to be one in place.
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If if what you say were true, and you've not backed that up with any link, (we are only talking about family home and parent living in it with adult children) then you could anyway get around it under Rent a Room.

There is no way revenue is going to open up charging adult children for staying in the elderly parents home. Can you imagine Joe Duffy !
 
No you would have to have a licence for rent a room for each year and it would have to be declared as income by the mother yearly. (even though not taxed) Also the max would be €14k per year - fine if the market value of rent was €14k or less.
 
Yes it is but the MIL is a widow so they can get 6K per year.
 
But your post is wrong. You can sell a house for €1, but the buyer will be assessed for CAT on the difference between the sale price and the market value. It's perfectly legal to do this and is cheaper than paying market price.
 

You are both saying the same thing here @JohnDoyle1973, why do you think Brendan is wrong?


She would not be in any trouble at all, she (and/or OP) would have a potential tax liabilty.


There does not appear to be any question of ignoring the consequences (in this instance a potential tax liability) or letting them go "down the line"

Also, to reiterate, an adult living in a "spare" property belonging to their parent is taxable. An adult living in the family home with the parent is not.
 
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