Capital Acquisitions Tax on purchase of parent's house?

C

chughesie

Registered User
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Hi,
I am currently buying my parents house off them at a reduced price. My parents will still be staying in the house after purchase. The value of the house would be c. €350,000 but we have agreed that I will pay €100,000 for the house. I have received no other gifts etc. to affect my CAT exemption limits.

Do I have any Gift Tax/CAT to pay on this?

If so, is my tax liability based on the value of the house, the price I paid for the house, or the difference of the two?

Thanks
 
Are you taking out a mortgage?

That would complicate things, but if you aren’t, the difference between what you pay and the market value will eat into your Group A threshold.

The key point though is that the market value won’t be €350k because you’re letting them stay.
 
Gordon Gekko said:
Are you taking out a mortgage?

That would complicate things, but if you aren’t, the difference between what you pay and the market value will eat into your Group A threshold.

The key point though is that the market value won’t be €350k because you’re letting them stay.
Click to expand...

Yes, the plan would be to take out a mortgage to pay for the house and provide money for upgrading.

Does letting them stay have an effect on my tax liability? I would have thought that from revenue's perspective, it's a transfer of an asset and liable to be taxed regardless of whether my parents stay or not. . . open to be corrected obviously!
 
The consideration given to your parents is allowed deduction against CAT. There is also the €3,000 gift exemption (€6,000 if you are buying the house with someone else).

Technically speaking there is a gift tax issue from you to your parents as you are giving them an interest in the property, i.e. letting him stay there rent free (presumably for the rest of their lives). In practice, most people ignore this but it is there.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
In an ideal world, that ongoing issue isn’t there because the reduced market value would take account of the life tenancy.

You’d use the relevant multiplier tables to come up with the right number.

The problem is the bank. Most can’t get their head around the life tenancy part and are wary of it.

The answer is probably to but it for €350k in the bank’s eyes but to buy it for its reduced market value from a CAT perspective. Your only leakages then are excess stamp duty (but only 1% of the differential) and having to spoof the bank which can make some people queezy.
 
The lower price if the life tenancy stuff is revealed but the bank may not play ball with that. Personally I’d swallow the higher number.
 
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