Sale of second house

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PeterC

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What are the implications?

My parents purchased house in 1965 in Galway for €10,000 approx.

In 1985 they moved to the country and purchased a second house. From 1985 my brother and I lived there when we went to college and my brother still lives there now. The hosue have never been rented out.

My parents now want to sell the property, and gift the proceeds to me and my brother. House in now worth approx. €375,000. What are the tax implications? I assume my parents will have to pay CGT even though it was family occupied all the time? Will there be any Gift tax or stamp duty issues?

What is the best way to minimise tax for all of us?

Any help would be appreciated
 
Speak to a tax advisor, paid advice is the best advice.

Do your parents still use the address where you are resident at.

Maybe for tax purposes get them to change their address with the Revenue to your address for 12 months as the last 12 months are deemed as resident in the house.

I think there is a way around this I just cant think of it off hand.

No gift tax for you guys, threshold is 450000 or something in a lifetime, check this though.
 
Could the way around be to gift it to your brother dependant on him giving you half the sale proceeds? That way he is selling his ppr, so no CGT and the gift is really coming to you from your parents rather than from him so no CAT. Is there any anti avoidance that would prevent this?
 
Vanilla, I can see where you are coming from but imo this would increase the tax charge. Stamp Stamp Duty would be payable on the property albeit half and CGT would be payable by the parent on the increased value at date of gift.
 
If your parents are letting you stay in a house that they own without any rent payments then technically the rent forgone was a gift from your parents to you (and your brother).

If your parents ultimately want to give you the cash (funded by means of disposal of the house) then why don't they just gift the house to you without selling it. The value of the gift would be whatever valuation your valuer gives to you. You two would be exempt from any increase in value from the date of gift to date of sale if the house would be the PPR of both of you.

This way there would be no CAT hit for either you or your brother as the once off lifetime limit from your parents is €478,155 (for 2006) each.

Your parents will suffer CGT on the gain but will receive an exemption from CGT on a portion of the gain to reflect the period of ownership from 1974 to 1985.

I think Stamp Duty will be charged in line with the value of the property but there may be a relief for children. I think its 50% of the usual stamp duty payable.

These things are usually worth talking to a tax advisor about so that all circumstances can be taken into account.
 
s.86 Exemption for Certain Dwellings (CATCA 2003) could be exploited by your brother if he's still living there - and this doesn't affect your threshold.

If property is disposed of any CGT payable will obviously reduce the value of the gift passing; can the house be passed instead ?

Be wary of advice given on these threads - check with a tax-accountant/lawyer. Solictiors aren't very good in these areas either.
 
If the exemption for certain dwellings rule is used which is what Vanilla was refering to, Stamp Duty is payable on the gift albeit reduced by 50% and CGT is payable as a disposal.
 
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