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Capital gains on Building Site brother to brother.

  • 08-12-2006 10:07pm
    #1
    Echelle
    Closed Accounts Posts: 163 ✭✭


    Can anyone out ther halp clarify the following?
    Brother A ( farmer)agrees to sell site to brother B for construction of house. The site is situated in an area where the planning authority limits the constructon of dwellings to family members who can show a need for housing.
    Planning permission is granted. Brother B starts to build and legal transfer of the land takes place.
    The site may be worth €150000 on the "Open Market". However,taking into account the special planning authority restrictions the value would be considerably lower. Brother A agrees to sell site for €50000, which would be subjected to caital gains tax of say €10000. On mortgage application and land transfer documents the value is stated as €50,000. However, can the tax authorities claim capital gains tax is owed on the"open market value" of €150000. The total tax liability could then be more than the agreed selling price of the land. As the brother selling the land could not be expected to endure a financial loss in the transaction the buying brother would have to pay the capital gains tax. This could mean the site could end up costing him maybe €100,000 or more? Has anyone ever come across such a potentially nightmarish scenario? Thanks for any info.


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