CGT & Inheritance Tax in one transaction

WhyTheFace

Hi,

I live in an apt owned by my father. He bought it 20 years ago for 100k and it is now valued at 350k. He has suggested selling it to me for 250k.

Having looked into the tax implications I've discovered that:

i) even if he sells it to me for 100k less than the market value he is still liable to pay CGT on the difference between what he paid and MV. So 33% of 250k.

ii) I've been living in the apt for more than 3 years but because I own a small apt in a rural town I am not exempt from paying inheritance tax which would be 33% of the difference between MV and what it's offered to me at. So 33% of 100k. (I will eventually reach the threshold of 280k from other inheritance).

It seems like a large amount of tax for both sides to pay. Is there any way to reduce/minimise this (legally)?

Thanks in advance

CIARAN_BOYLE

well he could sell it to you at market value. then there would be no CAT.

Or he could hold it till he dies and you could inherit it. There is no CGT on death.

dmaprelude

I'm pretty sure any CGT paid can be used as a credit against CAT if on the same asset in the same transaction

hjr

This is what dmaprelude is referring to:

http://www.revenue.ie/en/tax/cat/guide/credit.html

Where both Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT) are chargeable on the same asset, in connection with the same event, the Capital Gains Tax payable is allowed as a credit against the CAT. The credit, however, cannot exceed the amount of CAT attributable to the same asset.

Iker

Your father can sell it to you for €127,000ish and he won't have to pay any CGT as the indexation relief (1992/1993) would render the transaction no gain/no loss. Remember he has also gets the annual exemption of €1,270.
You won't have to pay any CAT because your lifetime threshold under category A (direct relative i.e. son/daughter) is €225,000.
That's supposing that you haven't used up your lifetime threshold on that category from other previous gifts/inheritances.
Sorted?

Iker

If he bought it 20 years ago, your father should be able to get some indexation relief added on the original cost of the property in 1996 and on any enhancement expenditure up to 2002, so he won't be paying 33% of €250,000. But he will be paying some CGT for sure (less €1,270 annual relief)

WhyTheFace

Thanks for all the replies.

He bought it in 1996.

Will look into indexation

Lockedout2

WhyTheFace wrote: »

Hi,

I live in an apt owned by my father. He bought it 20 years ago for 100k and it is now valued at 350k. He has suggested selling it to me for 250k.

Having looked into the tax implications I've discovered that:

i) even if he sells it to me for 100k less than the market value he is still liable to pay CGT on the difference between what he paid and MV. So 33% of 250k.

ii) I've been living in the apt for more than 3 years but because I own a small apt in a rural town I am not exempt from paying inheritance tax which would be 33% of the difference between MV and what it's offered to me at. So 33% of 100k. (I will eventually reach the threshold of 280k from other inheritance).

It seems like a large amount of tax for both sides to pay. Is there any way to reduce/minimise this (legally)?

Thanks in advance

Best bet is to go to a professional advisor. There are lots of reliefs available but can't be discussed on this website due to the charter.