Parent to Daughter Gift of House (non PPR)

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fayf

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A friend has been asked by their father to buy a 2nd property they have, currently the father's brother lives there.
The idea is they will buy the house, which is a small 1 bedroomed house, value circa 200k, and leave their uncle in situ.

Friends father assumed they could gift this house to his daughter, and as it is well below the 400k threshold, no CGT would arise for them, and no CAT on daughters side, and he is aware that 200k would reduce the daughters 400k CAT exempted threshold on his death.

Father went to solicitor to start the process, and was told he would be liable for CGT on the property, as he bought it several decades ago, the CGT would be circa 50 to 60k.

I had assumed that any gifts from parents to daughter, which are under 400k would be CGT free on both the person gifting the house, and CAT free to the person being gifted the house, unless it is the case, the CGT exemption for the father only applies to the fathers PPR only ?
 
CGT is due when you dispose of a property- it doesn't matter if you sell it or gift it. The CGT is payable by the disponer.

If you gift it, then the CAT payable by the beneficiary can be offset by the CGT paid by the disponer, reducing the CAT due

Of course, if no CAT is due, then the CGT cannot be offset
 
fayf said:
A friend has been asked by their father to buy a 2nd property they have, currently the father's brother lives there.
The idea is they will buy the house, which is a small 1 bedroomed house, value circa 200k, and leave their uncle in situ.

Friends father assumed they could gift this house to his daughter . . .
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OK, let's call the friend X, X's father F, X's uncle U, and X's daughter D.

F isn't gifting the property to anybody; he's selling it to X. It's not his PPR so he'll be liable for CGT in the usual way execpt that, because F and X are connected persons, the calculation won't be based on what F actually gets from X, but on the market value of the house at the date of the transaction. (But there's no suggestion in the OP that the sale price won't be market value anyway.)

X will then own a house for which he has paid Good Money. If he gifts it immediately to D that's be a no loss/no gain situation so X will have no CGT liability. The gift is within the charge to CAT but is within D's category A threshhold, so no (immediate) charge to CAT as a result of the gift. If X waits until U moves out or dies before gifting the house to D then the market value will likely have gone up so there may be a CGT charge for X. Assuming it hasn't gone up so much that D incurs a CAT liability, there'll be no possibility of D offsetting the CGT paid against her CAT. But, because of the increased value, the gift will use up more of D's category A threshhold.

(There's also the issue of CAT for U, who is getting a gift each year from F of the free use of the house, and and in the future will continue to receive annual gifts, but from D. But that's an issue that has been around for some time, so let's pretend it has already been addressed.)
 
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Thanks all, i get it now,

allthough i do find it odd, if father gifts a non PPR valued at 200k, to his daughter, he has a CGT liability, but if the daughter gets the house in his will, there is no CGT for father, as is deceased, and no CAT for daughter. Therefore there is no incentive at all in this case, to gift the property to his daughter.

As a matter on interest, if it was the fathers own house (PPR), that he was gifting to his daughter, would a CGT arise for the father ?
 
fayf said:
i do find it odd, if father gifts a non PPR valued at 200k, to his daughter, he has a CGT liability, but if the daughter gets the house in his will, there is no CGT for father,
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Yes, it is a stupid aspect of the Irish tax system that capital gains disappear on death. They shouldn't. Death should be treated as a ordinary disposal and taxed accordingly.

Some people don't dispose of assets, which they would otherwise dispose of, to avoid CGT. This is not good for financial planning generally.
 
Brendan Burgess said:
Yes, it is a stupid aspect of the Irish tax system that capital gains disappear on death. They shouldn't. Death should be treated as a ordinary disposal and taxed accordingly.

Some people don't dispose of assets, which they would otherwise dispose of, to avoid CGT. This is not good for financial planning generally.
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Or, gains could be rolled over on death, with the entire gain brought to charge when the heir disposes of the inherited property.
 
jpd said:
If you gift it, then the CAT payable by the beneficiary can be offset by the CGT paid by the disponer, reducing the CAT due
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Can a beneficiary chose to pay CAT in this scenario to avail of the CGT offset whilst still retaining the full use of the €400k threshold limit for subsequent use? Or does a beneficiary have to avail of the threshold prior to incurring any CAT?
 
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