son living in house owned by parent rent free

[Graham_07]

Mr X owned 2 properties, his PPR and another residence. Mr X's son has been living in the other property rent free for a few years. Mr X has died. Revenue inquiring into usage of that property (being listed on Schedule of Assets ) . Tax implications for Son / Estate ? Comments appreciated.

 

[ClubMan]

I'm not a tax expert (and expert advice may be a good idea here) but I don't see that any rental income tax issue arises here if the son was living there rent free. I presume that the sale of the property would still be assessable for CGT as normal with an investment property?

 

[Stifster]

Revenue are wondering where the rental income went, can't see any issue for the estate as that is answered.

Could the revenue deem a tax free residence as a yearly gift? tax people?

 

[ClubMan]

Could the revenue deem a tax free residence as a yearly gift?

Even if they did then (a) the tax issue would be the son's and (b) presumably it would fall under the relevant gift tax exemption threshold although returns might still be required? As I said though - I'm not a tax expert!

 

[Nige]

Yes but the "gift" of the use of the asset would be worth so little that between the annual €3,000 small gift exemption and the large threshold for gifts/inheritances for a child, no tax would be payable (and no return due).

If Mr X has left the property to his son and the son has been living there for three years, that inheritance is ignored for tax purposes.

 

[Graham_07]

The son is not the beneficiary of this property under estate or Nige's comment would be valid and a worthwhile relief. I guess main worry is any possible benefit and tax charge on son from rent free status. With rents today such a property might be worth at least €1,000-€1,200 pm. Could this be a BIK on son with Income Tax implications or might it be argued as part of his Class A Threshold for CAT after using the annual €3K exemption

 

[Stifster]

The son is not the beneficiary of this property under estate or Nige's comment would be valid and a worthwhile relief. I guess main worry is any possible benefit and tax charge on son from rent free status. With rents today such a property might be worth at least €1,000-€1,200 pm. Could this be a BIK on son with Income Tax implications or might it be argued as part of his Class A Threshold for CAT after using the annual €3K exemption

thats what I was wondering....

 

[ubiquitous]

I guess main worry is any possible benefit and tax charge on son from rent free status. With rents today such a property might be worth at least €1,000-€1,200 pm. Could this be a BIK on son with Income Tax implications or might it be argued as part of his Class A Threshold for CAT after using the annual €3K exemption

I would find it hard to believe that any tax implication exists under either category.

I can't see how BIK could apply in the absence of an employer-employee relationship or similar.

Get specific professional advice if you're still unsure.

 

[Nige]

Unless the son worked for his father, BIK and income tax don't come into it and even at 1,200 per month the gift of the use of the property doesn't make much of an indent into the parent/child threshold.

 

[Graham_07]

Thanks for comments folks. Have just found this http://www.irishstatutebook.ie/2003/en/act/pub/0001/sec0040.html#partv-sec40
Which basically says that where a person is allowed have the use, occupation or enjoyment of another person's property free or for less than market value, this constitutes a gift for CAT purposes.
Son may have exhausted threshold for CAT already under the will so it seems that there may well be a CAT issue to be investigated.

 

[ubiquitous]

Have just found this http://www.irishstatutebook.ie/2003/en/act/pub/0001/sec0040.html#partv-sec40
Which basically says that where a person is allowed have the use, occupation or enjoyment of another person's property free or for less than market value, this constitutes a gift for CAT purposes.

I would be very reluctant to read this literally and in isolation from expert advice, from very senior tax professionals if necessary. Every child and teenager and quite large numbers of adults live for years on end in their parents' home rent-free. I would not accept for a second that this should have any implication on CAT thresholds.

 

[Graham_07]

I would be very reluctant to read this literally and in isolation from expert advice, from very senior tax professionals if necessary.

As I said, "...to be investigated".

Every child and teenager and quite large numbers of adults live for years on end in their parents' home rent-free. I would not accept for a second that this should have any implication on CAT thresholds

.

As per OP, was not the parents home but another dwelling owned by him. Hence again reason for further investigation.

 

[Nige]

Thanks for comments folks. Have just found this http://www.irishstatutebook.ie/2003/en/act/pub/0001/sec0040.html#partv-sec40
Which basically says that where a person is allowed have the use, occupation or enjoyment of another person's property free or for less than market value, this constitutes a gift for CAT purposes.
Son may have exhausted threshold for CAT already under the will so it seems that there may well be a CAT issue to be investigated.

There's no doubt but that it's a gift.

However, that gift was given in earlier years and would not have created a gift liability then.

If, taking this into account, together with his inheritance, he is now subject to CAT, that is a current issue for the son to sort out (unless the will left him a bequest net of tax).