Site transfer from parent to child. CGT?

H

hanosul

Guest
Hello,

My father would like to transfer a portion of his garden in order for me to build a house and live beside him. My parents are getting elderly and would like the security of having me close by.

The site is not big, but it is in Dublin, so the value of the site is much higher than the CGT exemption level of €254000. Supposing the site is worth 400,000 (purely due to location and not size) is CGT payable on the total value of the site - or on the difference between the exemption and 400000?

I would appreciate any advice on how to proceed with this, since the site will only be used to build a house for me to live in for the next 40 years, and essentially it will enable me to care for my parents.

Is there any way around this? Can I somehow sell my soul to the tax man in order to get my fathers site?

Thanks for any help.
 
Don't think you have to worry about CGT - it's Gift Tax you have to worry about . There is an exemption between parents and child of (currently for 2006) €478,155.
 
Abbeykiller said:
Don't think you have to worry about CGT - it's Gift Tax you have to worry about . There is an exemption between parents and child of (currently for 2006) €478,155.
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Is 478155 not the exemption for gift tax?
 
if your father gifts you the land then the exemption above applies and he is not charged capital gains tax. You are not charged tax if site is below the exemption limit. However, you may have a stamp duty liability AFAIK but it is halved for a blood relative.
 
If I understand you correctly then you only pay gift tax or capital gains tax, but not both?

So if the site is given as a gift it's subject to gift tax, but if it's just transferred over it's subject to captial gains tax.
 
I'm open to correction but I don't think liteweight is correct. I'd imagine that if above 254k but below CAT threshold your father could still be liable to CGT. Best to get some professional advice.
 
I believe Vanilla is correct CGT will arise if the value is above the threshold.
Perhaps you could consider not have the site transfered to you at present but instead on the death of your parents. In that case CGT will not apply only CAT and provided the site is worth less than 478,155 no CGT will apply. In the meantime your parent could allow you to build on their site, but they remain as owners.
The obvious problem with this is if you need a mortgage to build you can not offer security of the site so you will need your parent to becaome gurantors.
You should before doing anything seek good professional advice.
 
hanosul said:
If I understand you correctly then you only pay gift tax or capital gains tax, but not both?

So if the site is given as a gift it's subject to gift tax, but if it's just transferred over it's subject to captial gains tax.
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Let me clarify:- If your father gifts you the land you are entitled to receive it tax free up to a value of approx 478 thousand. You are not liable for capital gains tax.

If your father SOLD the land to you at a nominal rate say 200k and the land was worth 400K on the open market, then HE would be liable for capital gains tax on the market value less what he paid for the land originally plus indexation.

I must stress that I am not a tax consultant and presume you'll take independent advice. I often ask questions on this forum simply to clarify what questions I should be asking!
 
Liteweight- it makes no difference for CGT purposes whether land is gifted or sold.
 
Liteweight - I am a tax consultant and you are wrong on this.

Where a parent transfers a site to a child the parent is liable to CGT on the disposal. Where that site is less than 254k then no CGT liability will arise. However, where the site is in excess of the 254k limit, CGT will apply on the full value of the site. Rate @ 20%.

Further, a potential charge to CAT (gift tax) arises on the transfer of the site. Where the value of the site is less than 478k as mentioned above then no CAT arises so long as there has been no other gifts from the parents.

Lastly a charge to Stamp Duty will arise as the site value is in excess of 254k.

There are legitimate ways around all of these but it would mean not taking the site as yet but leaving it in the parnets name.
 
Sounds like I'll really need to get some advice on this, thanks for all your help.
 
Can a brother gift a site to a sister ?

Yes.

to avoid paying gift tax? What do you mean? If brother has a gift tax liability then do you mean can he not take the gift? Or can he shift the liability ?

mf
 
What if there is a clause in the planning permission that states that only family can build on the land and that when the house is built it cannot be sold for ten years then the value of the site would decrease?
 
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