inheritance & CG tax

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wheels

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If a person was to live in a house their parents previously rented out what would be the consequences of eventually signing the house over the child? For example would the child have to pay inheritance tax and would the parents have to pay CG tax as it was never their primary residence?
 
wheels said:
If a person was to live in a house their parents previously rented out what would be the consequences of eventually signing the house over the child? For example would the child have to pay inheritance tax and would the parents have to pay CG tax as it was never their primary residence?
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Properly speaking, you are referring to Gift Tax here as Inheritance Tax only applies when property passes following the death of its owner. Similarly, Capital Gains Tax applies when the owner of an asset disposes of it and in so doing makes a profit.


Take a look at

http://www.citizensinformation.ie/c...capital-acquisitions-tax/?searchterm=gift tax
 
If the child lives in the house for 3 years and has no other interest in any residential property, then the gifting of that house to them will not be subject to gift tax (and won't eat up part of their tax free threshold from their parents).

However, on gifting the property, the parents will be deemed to have disposed of it for market value and will be subject to CGT at 20% accordingly.
 
Nige said:
If the child lives in the house for 3 years and has no other interest in any residential property, then the gifting of that house to them will not be subject to gift tax (and won't eat up part of their tax free threshold from their parents).

However, on gifting the property, the parents will be deemed to have disposed of it for market value and will be subject to CGT at 20% accordingly.
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Is a handy relief, but also beneficiary must continue to live in the house as their only or main residence for the 6 years following the gift.
 
Am I right in assuming that the CG tax will be caclulated at 20% of the difference between the buying price and the current market value? If so, they'd be looking at paying an estimated 100,000euro on a property bought 26 years ago for a very small sum. Is there anyway to get legally get that figure down? For example taking inflation etc. into account?
 
wheels said:
Am I right in assuming that the CG tax will be caclulated at 20% of the difference between the buying price and the current market value? If so, they'd be looking at paying an estimated 100,000euro on a property bought 26 years ago for a very small sum. Is there anyway to get legally get that figure down? For example taking inflation etc. into account?
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The CGT computation swould be on the market value ( with connected persons must ensure arms-length value taken ) less the indexed cost, if purchased up to to 2002. Indexation only applies to assets purchased up to 2002 and in any event, for such assets, only goes up to 2002 as it was abolished after that . So if a house was, say purchased for £20,000 in 01/01/80 and now has a value of €300,000 then the computation would be

Cost £20,000 /.787464= €25,394 x 3.742 (the index for pch in 1979/80) = €95,027. (the indexed cost )

€300,000 - €95,027=€204,973 = chargeable gain
if jointly owned deduct €1,270 x 2 leaving
taxable gain of €202,433 x 20% = €40,487 tax.

The indexed cost could be increased for any enhancement expenditure over the years, if any and that would also help reduce the chargeable gain. There may also be other mitigating factors, part period as the parents principal private residence or such. I would suggest, if this is going ahead, that a proper professional consult be taken to get accurate computations so all parties are aware of the relevant law and possible tax.
 
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