Capital gains tax

Hannibal_12

Hello,
My father owns two properties that are just about coming back to pre-crash levels. As such he's looking into selling them but apparently there'd be quite a sizable capital gains tax bill. Is there anyway around/minimise this? Via bequeathing it to sons or through some other mechanism?

Thanks

4ensic15

Hannibal_12 wrote: »

Hello,
My father owns two properties that are just about coming back to pre-crash levels. As such he's looking into selling them but apparently there'd be quite a sizable capital gains tax bill. Is there anyway around/minimise this? Via bequeathing it to sons or through some other mechanism?

Thanks

If he sells, how can he bequeath? You can't have your cake and eat it.

Samuel T. Cogley

4ensic15 wrote: »

If he sells, how can he bequeath? You can't have your cake and eat it.

He means transferring them to the sons to sell on, presumably to transfer the money back to the father.

Peregrinus

Gifting the property to his sons (or anyone else) won't help. Giving property away is a disposal just as much as selling it, and it triggers a charge to CGT. Plus of course gifting the properties to his sons might give rise to a CAT charge.

Unless, of course, the property is of a class that can benefit from one of the CGT reliefs, e.g. business assets or a farm. Or unless one of the properties is the guy's principal private residence. But the OP leaves me with the impression that they are just conventional investment properties, purchased in order to be rented out.

Luckysasha

Surely CGT only kicks in if he makes a profit on the sale. If they are coming back to pre crash levels then is it not a case of he will be selling them for in or around what he paid for them ?

Peregrinus

Luckysasha wrote: »

Surely CGT only kicks in if he makes a profit on the sale. If they are coming back to pre crash levels then is it not a case of he will be selling them for in or around what he paid for them ?

Only if he bought them just pre-crash. If be bought them well before that, at a lower price, there will be a signficant gain.

Claw Hammer

Samuel T. Cogley wrote: »

He means transferring them to the sons to sell on, presumably to transfer the money back to the father.

A bequest is on death. How can money be given to a dead person? There are legal and illegal ways to reduce capital gains tax. The legal ways generally involve roll-over and offset. A consultation with an experienced practitioner is advisable if there is a large sum involved.

Samuel T. Cogley

Claw Hammer wrote: »

A bequest is on death. How can money be given to a dead person? There are legal and illegal ways to reduce capital gains tax. The legal ways generally involve roll-over and offset. A consultation with an experienced practitioner is advisable if there is a large sum involved.

It was obvious what he was driving at 4en... sorry claw hammer.

beauf

There would be gift tax too no?

Peregrinus

beauf wrote: »

There would be gift tax too no?

Yes, potentially, if the strategy involved making a gift of the property to someone.

DubCount

Hannibal_12 wrote: »

Hello,
My father owns two properties that are just about coming back to pre-crash levels. As such he's looking into selling them but apparently there'd be quite a sizable capital gains tax bill. Is there anyway around/minimise this? Via bequeathing it to sons or through some other mechanism?

Thanks

The only certainty in life is death and taxes. I think your father should just accept there is going to be a CGT liability and move on. The liability only arises for the profit he has made, so he is still doing well from the sale.

Transferring the property to a relative (even at below market value) creates the same CGT liability, as Revenue will deem the transaction between related parties to be at the rate that would have applied to an arms length transaction. That's in addition to any Capital Acquisition Tax (Gift Tax) for the relative.

Nobody likes taxes, but this is a fair tax on realised profits, and I think its just a matter of accepting it and moving on.

Pawwed Rig

There will be no CGT if they are transferred on the father's death. The group A thresholds may also relieve CAT. I would need your exact circumstances to give full advice*


*which I wouldn't be doing for free

Heisenberg.

This post has been deleted.

myshirt

Heisenberg. wrote: »

Not going to make much difference but transferring one house to his spouse will open up a second tax free allowance of €1270.

Better option is to wait it out like a lot of investors for a more fairer rate of CGT tax to be introduced by a new/existing Govt. 33% is punitive.
Flip side of that though is someone like SF ever getting into power who have said they’ll increase it to 48%.

Punitive?

What's punitive is a tax on work. What's punitive is direct government intervention benefiting one group of people (baby boomers, early gen'x'r's) and burdening another, which remains unremediated. Nothing wrong with a tax on private capital gains. Especially where you hold it not through your own effort, but through dysfunctional fiscal policy that put it in your pocket. I'm not aligned with Sinn Fein on their policy decisions but have to say I would support them in raising CGT and CAT, reducing CAT thresholds, and removing some of the reliefs, albeit not so much on the business related reliefs on transfer to a company, but certainly restrictions on personal retirement relief, transfers to children and favoured nephews, and a restriction on the CGT relief on PPR disposals. I'd up LPT too before I would tax work.

beauf

Good luck getting people to buy and sell houses if that comes in. SF and similar will be scratching their heads why the housing crisis gets even worse.

beauf

myshirt wrote: »

...certainly restrictions on personal retirement relief, transfers to children and favoured nephews, and a restriction on the CGT relief on PPR disposals. I'd up LPT too before I would tax work.

That is taxing work. Just indirectly.

Also it would possibly make more sense to rent than buy. Nice push on rents then.

As the op has discovered there is no way to avoid huge tax bills with property. I wonder how much of an impact it has on the govt coffers Vs Apple tax.

The op should consider what the fair deal costs too. Elderly parents might need it.