Capital Gains Tax - liable for selling mothers property?

Mitch Connor

My mothers mum in law needs to be put in a home and they are going the fair deal route and looking to sell her house.

As it stands, there is no mortgage on the house, and by the deeds it is owned jointly by my mums husband and mother in law. The husband has been paying (and finished paying) the mortgage for years.

According to my understanding of CGT they would not be liable on their half of the proceeds from the house sale as the house was the primary residence of a dependent relative. My mums solicitor seemed to be working on an assumption CGT would be due (but she was not asked this directly).

http://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_gains_tax.html

Capital gains exempt from Capital Gains Tax
Gains or profit on the disposal of some assets are specifically exempted from Capital Gains Tax, these include:

Gains on the disposal of property owned by you (house or apartment) which was occupied by you or by a dependent relative as a sole or main residence.

The husband is part owner of the house, and the mother is (or should be) a dependent relative, it was her sole residence, and was the primary residence of my mothers husband until about 10 years ago. He was, and continued to, pay the mortgage on the house.

1. Is the Citizens Info site incorrect?
2. Would the mother in law not be considered a dependent relative? I would guess there may be some legal definition of dependent relative that she may not qualify under.
3. Is the part ownership on the husbands part a problem here?

I have told my mum to talk to an actual property solicitor and get it clarified, but by my reading of the rules I can't see why they'd be liable. Unless the mother in law is not deemed a dependent relative, though she should be.

They are also talking about renting the house for 6 months or so - but I think this could effect the CGT liability, so have told them not to rent it out (to a family friend) unless they have the CGT question fully squared away.

dogsears

Looks like there would be a good case here. The disposals that qualify include disposals "of an interest in" a house occupied by a dependent relative and so the fact that the husband only owns half should not be an obstacle.

Dependent relative means "a relative of the individual, or of the wife or husband of the individual, who is incapacitated by old age or infirmity from maintaining himself or herself, or the widowed father or widowed mother (whether or not he or she is so incapacitated) of the individual or of the wife or husband of the individual." Looks like that should be satisfied also.

Suggest you press the solicitor on it though you may need to consult a tax advisor also, but see what the solicitor says first. As you say, the question hasn't been specifically asked yet so she might readily agree when asked.

Marcusm

I find your statements and questions a bit confusing; the house is owned by your grandmother and her (?estranged) husband. It seems from the stated facts clear that any gain arising to your grandmother from the disposal of her interest in the house would be exempt from CGT in her hands. The treatment of her (?estranged) husband would depend on all the facts and circumstances of his position. THe issue of a "dependent relative" doesn't seem to come into it in any way (except potentially by extension when dealing with the (?estranged) husband.

As a separate matter, under the "fair deal", your grandmother will, if she spends more than 3 years in the nursing home, have to contribute a greater proportion of her assets to the state in return for the care if she has sold the house as opposed to retaining it. There is no need to finance the contribution based on the value of the house until it is sold or she is deceased (can't think how to express this better).

Alan Shore

My mums mother: your grandmother

Mums husband: your father and grandmothers son???

Mr. Incognito

Talk to a tax advisor.

Your mom in laws portion would be relieved as it was her ppr.

Your husbands portion should be relieved as a dependent relalative.

Marcusm

I think I can now understand the difficult descriptions - your mother's husband is not your father (perhaps your step father) and your mother's mother in law ids not your grandmother.

The elderly lady's position should be clear. As regards the co-owner, he may be entitled to relief if he has been supporting his mother on the grounds of her diminished financial capacity or infirmity, it the elderly lady couldn't afford to pay the mortgage and so he did.

It sounds as if a good tax advisor would help clarify these matters.

Irrespective of the tax position, your family members need to consider the financial implications of the fair deal scheme - setting aside the income component, there is an annual 7.5% contribution based on the value of the person's assets. Where these represent a family home, they are capped at 3 years contribution. Otherwise they are uncapped. Contributiosn absed on a family home can be rolled up until the home is sold.

Mitch Connor

Marcusm wrote: »

I find your statements and questions a bit confusing; the house is owned by your grandmother and her (?estranged) husband. It seems from the stated facts clear that any gain arising to your grandmother from the disposal of her interest in the house would be exempt from CGT in her hands. The treatment of her (?estranged) husband would depend on all the facts and circumstances of his position. THe issue of a "dependent relative" doesn't seem to come into it in any way (except potentially by extension when dealing with the (?estranged) husband.

As a separate matter, under the "fair deal", your grandmother will, if she spends more than 3 years in the nursing home, have to contribute a greater proportion of her assets to the state in return for the care if she has sold the house as opposed to retaining it. There is no need to finance the contribution based on the value of the house until it is sold or she is deceased (can't think how to express this better).

No, it's owned by my step father and his mother. The step grand mothers husband died decades ago and wasnt in the picture before that. So if the house is sold half the proceeds would go to my step dad (as part owner) and half to his mother. My step dad had been paying the mortgage for years and finished paying for it last year. He looked after his mum and my assumption is she should be considered his dependent relative.

Alan Shore

(11)(a) A “dependent relative” is a relative of the individual or of the individual’s spouse or civil partner who is incapacitated by old age or infirmity from maintaining himself or herself, or the widowed father or widowed mother of the individual or of the individual’s spouse whether or not so incapacitated.