Gift Tax??????

lisamd

Hi!

I'm wondering if anybody can help/explain simply the fundamentals of gift tax?

My boyfriend has recently been going through the steps of buying out an ex-girlfriend from a site which they purchased together. At the time the site cost €25,000, into which he invested €20,000 and she invested €5,000.

So, he had to pay her off to the value of €5,658.80, but he got a letter from his soloicitor following this, and we are a bit perplexed by it. The letter reads the following,

- We aknowledge receipt from you of €5,658.80 and confirm that we have now prepared contracts for sale and deed of transfer which we have sent to "Mary's" solicitor for approval.
However we not that the Auctioneer Valuation shows the current value of the property to be €25,000.
On the basis that you are acquiring "Mary's" half share of the property for less than the full market value you should submit a gift tax return to the revenue commissioners.
There will be no gift tax payable by you unless you have received some other gifts or inheritances from any other person since December 1991 which would be aggregated with this gift. -

The solicitor has told "John" that he must pay a gift tax, but from what I can make out he does not have to pay one unless he got money as a gift and it is contributing to the pay off he had to give "Mary." Or am I completely wrong? The site was payed for with a credit union loan.

Can anybody explain it to me in simple terms please?

Thank you!!

Shane732

lisamd wrote: »

Hi!

I'm wondering if anybody can help/explain simply the fundamentals of gift tax?

My boyfriend has recently been going through the steps of buying out an ex-girlfriend from a site which they purchased together. At the time the site cost €25,000, into which he invested €20,000 and she invested €5,000.

So, he had to pay her off to the value of €5,658.80, but he got a letter from his soloicitor following this, and we are a bit perplexed by it. The letter reads the following,

- We aknowledge receipt from you of €5,658.80 and confirm that we have now prepared contracts for sale and deed of transfer which we have sent to "Mary's" solicitor for approval.
However we not that the Auctioneer Valuation shows the current value of the property to be €25,000.
On the basis that you are acquiring "Mary's" half share of the property for less than the full market value you should submit a gift tax return to the revenue commissioners.
There will be no gift tax payable by you unless you have received some other gifts or inheritances from any other person since December 1991 which would be aggregated with this gift. -

The solicitor has told "John" that he must pay a gift tax, but from what I can make out he does not have to pay one unless he got money as a gift and it is contributing to the pay off he had to give "Mary." Or am I completely wrong? The site was payed for with a credit union loan.

Can anybody explain it to me in simple terms please?

Thank you!!

The site originally cost €25,000 - John invested €20,000 and Mary €5,000. Therefore, did John not buy 4/5's of the property and Mary 1/5?

The reality is that the site is probably held in joint names and that the issue regarding the fact that €20,000 provided 4/5 of the funds whereas Mary only invested 1/5 was probably irrelevant at the time. From a tax perspective the question arises as to whether John gave Mary a gift of €7,500 (i.e to bring split up to 50:50).

In relation to the transfer now - if Mary holds a 50% interest in the site now then if she transfers her 50% interest at anything under market value there will be an exposure to CAT. However, assuming John has not received over €16,750 of gifts/inheritance from a Group C individual then CAT will note be payable on the receipt of the gift.

lisamd

What I was thinking is that perhaps because Mary's half share would be 12,500 and the fact that she is accepting 5658.80, the remainder of 6841.20 may be seen as a gift from Mary to John? But still it doesn't meet the threshold of an amount that would subjected to tax.

Maybe this is just a case of the solicitor getting things wrong!