Query re selling parents’ house

C

Chef

Registered User
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Hi,
So we are in the process of selling my parents’ house. They passed away over the past few years.

We got it valued as part of the estate. It has now gone sale agreed for approx 30% higher then this valuation.

We have been told by the solicitor looking after the will that we will now have to pay tax on this 30% change in value. The sale price is way below our thresholds for inheritance tax.

Does this sound right?

Thanks
 
Sounds very right. You inherited a house that was worth X. You then held onto that house for a period and sold it when it was worth Y. This is a capital gain and is taxed as such.
 
Have you already inherited the house ?

If so, then you are liable for Capital Gains Tax (CGT) on the gain between the value of the house when you inherited.
In not, then your parent's estate is liable for CGT on the gain since the the valuation date on death

In any case, CGT will be due
 
Was it any of your PPRs in the interim, or did you spend any money on enhancements? That might reduce the overall tax bill.

Principal Private Residence (PPR) Relief

This is an explanation of what relief on cgt is available for a Principal Private Residence (PPR)
www.revenue.ie www.revenue.ie

How to calculate CGT

This page explains how Capital Gains Tax is calculated
www.revenue.ie www.revenue.ie

But I guess you need to view it now as you inherited a house that was 100k, now you sell it for 130k, and you pay 33% tax on the 30k. If you had sold it on inheritance, you would still have made less than selling it now, even net of tax. On top of any income you may have made from it in the meantime eg renting it out, or saved on rent or mortgage by living in it yourselves.
 
Chef said:
They passed away over the past few years.
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So the 30% probably reflects the real rise.

Some people in an effort to avoid CAT get valuation of the house on the low side. But as they are probably not in the CAT net anyway, they don't save anything.

Then when they go to sell it a few years later, they realise that this has cost them money in CGT.

Brendan
 
Brendan Burgess said:
So the 30% probably reflects the real rise.

Some people in an effort to avoid CAT get valuation of the house on the low side. But as they are probably not in the CAT net anyway, they don't save anything.

Then when they go to sell it a few years later, they realise that this has cost them money in CGT.

Brendan
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I would think the valuation may have been a bit on the low side looking at average price increases nationally and locally. The market has been a bit volatile overall with the lack of supply etc also.

Not sure if there is anything we can do at this stage based on the above factors?

We dawdled a bit on getting the house cleaned out and ready for sale alright but I still find it hard to believe the house increased 30% in value when the average annual increase was in and about 7.5% based on recent reports.
 
But you are still ahead. You are only paying tax on the increase in value. And then only 33%. So you get 67% of the increase in value and you didn't have to do anything or spend money to get this value. If the valuation was low, you would still be in the same boat even if you sold it earlier.
 
misemoi said:
But you are still ahead. You are only paying tax on the increase in value. And then only 33%. So you get 67% of the increase in value and you didn't have to do anything or spend money to get this value. If the valuation was low, you would still be in the same boat even if you sold it earlier.
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Yes, but had the valuation been higher we would be paying 33% on a smaller amount.
 
How did you evidence the valuation at the time ? Were you happy with it then ? Appreciate that it is not always possible to get a solid valuation depending on the property type. But also average annual increase isn't always an appropriate measurement of expected growth either, depending on the area a more realistic one would be a more local average. Are you able to get any more refined data, even to put your mind at ease ?
 
misemoi said:
How did you evidence the valuation at the time ? Were you happy with it then ? Appreciate that it is not always possible to get a solid valuation depending on the property type. But also average annual increase isn't always an appropriate measurement of expected growth either, depending on the area a more realistic one would be a more local average. Are you able to get any more refined data, even to put your mind at ease ?
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We are meeting with the solicitor during the week. I will get his thoughts on it.
I suppose we trusted the appointed auctioneer with the valuation at the time and had no reason to question it - not being aware that any increase would be subject to CGT!
 
Chef said:
We are meeting with the solicitor during the week. I will get his thoughts on it.
I suppose we trusted the appointed auctioneer with the valuation at the time and had no reason to question it - not being aware that any increase would be subject to CGT!
Click to expand...
Was the inheritance exempt though because of the thresholds? If it wasn’t, then it’s swings and roundabouts, obviously. But valuations are tough, particularly in this environment where things can sell quite quickly at much more than one might expect. I’d just look at it as a positive, i.e. tax is a function of making money. Condolences, by the way.
 
Gordon Gekko said:
Was the inheritance exempt though because of the thresholds? If it wasn’t, then it’s swings and roundabouts, obviously. But valuations are tough, particularly in this environment where things can sell quite quickly at much more than one might expect. I’d just look at it as a positive, i.e. tax is a function of making money. Condolences, by the way.
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Yes, it was exempt.
Thanks
 
Estate Agents seem to have a lot of flexibility when giving house valuations depending on the purpose of the valuation.
A friend got a valuation for Fair Deal purposes of €500k, the lower side of reasonable the agent said, the owner died soon after.
6 months later the same agent gave a probate valuation of €750k.
 
As far as I know you can offset the estate agents fees and any other significant once off expenses you would have incurred in the management of the property e.g. new boiler etc
 
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