Tax efficient way to gift investment property

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Paddylast

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Have two children who will eventually inherit an investment property and I wonder if it would be more tax efficient to transfer it now rather than leave it in a will. If I transfer it now does that mean engaging a solicitor re changing names on the deeds and registering same. How is this recorded for future CAT purposes especially if it increases in value. At present the property is worth about 220k so would be under the current threshold of €225k.

Thanks in advance.
 
The CAT liability is calculated based on the value of transfer, so future increases in value won't cause a further CAT liability after the transfer.
Some questions - Are the children over 18? Is the property mortgage free?

Yes, would need a solicitor to transfer title, and from your point of view it is disposal of an asset so you may have to pay CGT if the house has increased in value since you bought it.

The 225 limit is per child, so they will each be using only half of their threshold if you gift them the house between them
 
Thanks hippy1975 for your reply.

Just to answer your queries - yes both are we'll over 18 and both living and working abroad. Yes the property is now mortgage free. Oops! I hadn't thought about the increase in value since we bought it. Bought for 100k in 1997! Is a transfer considered a disposal in these circumstances?
 
Paddylast said:
Thanks hippy1975 for your reply.

Just to answer your queries - yes both are we'll over 18 and both living and working abroad. Yes the property is now mortgage free. Oops! I hadn't thought about the increase in value since we bought it. Bought for 100k in 1997! Is a transfer considered a disposal in these circumstances?
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Yes, you'll have a capital gain of the difference between its Mkt Value at time of disposal less purchase cost/legal/stamp duty in 1997 (plus a few percent indexation).

If you dispose of it then the income from it becomes their income, it's no longer your property or your rental income.
 
Thanks a million for the advice. appears this is not as simple as it first seemed. Thanks again.
 
If an adult child lives in the investment property, can you gift it to them without CAT liability?
 
Yes, once they have lived there for (I think) 3 years. Revenue.ie has all the details.
I think CGT still arises those for the person gifting it
 
I think CGT still arises those for the person gifting it
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How can CGT arise for the person gifting the property, they haven't made any gain if they are giving it away?
 
I believe that if you have or can get a valuation of the property in 2002, the year indexation was abolished, this can affect the CGT calculation.

This would probably work in your favour if as is likely most of the gain happened before 2002.

All the gain which occurred between 1997 and 2002 can be reduced by indexation, and the gain since (possibly very little) cannot be reduced by indexation.

If you do not have or cannot get a valuation as at 2002 the gain will be assumed to have accrued equally each year since 1997, and so only 5 / 17 will be subject to indexation.

Thats my understanding, I am not an expert.
 
Thirsty said:
How can CGT arise for the person gifting the property, they haven't made any gain if they are giving it away?
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A gift is a deemed disposal at market value for CGT purposes.

So if I give a present of shares worth €300k to my son, it is the same for CGT purposes as if I had sold them on the open market for €300k.
 
From Revenue


What happens if I dispose of an Investment property?

You will be liable to CGT on any gain you make. (In the first place, you should realise that 'disposal' includes not alone an outright sale but also a gift. In circumstances where the disposal proceeds are less than market value, the market value is used to calculate any gain arising). The gain you make (ignoring indexation and purchase and sale costs) is simply the difference between the purchase price and the sale price.


mf
 
What a crock! (but thank you for letting me know)

Up to now, I've never had to worry much about tax beyond PAYE etc., the more I find out about Inheritance, CAT, CGT and the like the more incensed I find myself.

It's like being held to ransom by Chinese War Lords...
 
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