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Transfer of Apt from Father to Son

  • 28-12-2019 10:13am
    #1
    WhyTheFace
    Registered Users, Registered Users 2 Posts: 462 ✭✭


    Hi,

    Can someone please advise...

    A father bought an apt in Dublin city in 1996 for €100k. It is now worth €350k.

    The father wants to sell the apt to his son but avoid the banks and is happy to receive a set payment from his son, maybe €50k lump sum and then €10-12k per year. The son will not have paid back the remaining sum on the apt by the time his father dies (father is currently 70 years old).

    What are the tax implications for this transaction?

    1) The father will pay CGT on the appreciation of the apt.

    2) If the father dies in say, ten years, and the son has paid back €170k will he pay inheritance tax on the value of the apt on the day of transfer of ownership less what he has already paid? €350-170k = €180k.

    Are there any issues with this transaction or could/should it be done differently?

    Thank you in advance


Comments

  • #2
    thegolfer
    Registered Users, Registered Users 2 Posts: 346 ✭✭thegolfer


    You have hit the main points on the head there.

    CGT for the father and purchase for the son. Make sure you have a valuation on file proving the market value of the property on disposal.

    Son pays stamp duty also on the market value of the property.

    Document the transaction with a solicitor, and sign.

    The father is extending a loan to the son. If the father dies before the loan is fully repaid, then the outstanding loan would be treated as an inheritance to the son, so best to consider the prior gifts from father to son thresholds and potential tax payable.

    Has the property been used as security for the banks? If so avoiding the banks may be difficult to avoid.

    Another point, the loan the father is extending to the son, if interest free, the father is forgoing having the interest income of the €350k on deposit, so the son will be receiving a gift of the interest free element equivalent to the interest foregone by the father approx 1%. Say 3500 interest annually to the son, the first 3000 is under the gift exemption, the balance 500 is taxable, and taken off the lifetime gift threshold. However if the father charges interest then taxable in his name.


  • #3
    WhyTheFace
    Registered Users, Registered Users 2 Posts: 462 ✭✭WhyTheFace


    Hi Golfer,

    Thanks a million for your reply.

    Is it entirely up to the father-son agreement what the annual repayment is?

    Let's say the son agrees to pay 15k per annum over 20 years. Can he take advantage of the small gift exemption and only pay 12k per annum even though the loan is reduced by 15k?


  • #4
    thegolfer
    Registered Users, Registered Users 2 Posts: 346 ✭✭thegolfer


    WhyTheFace wrote: »
    Hi Golfer,

    Thanks a million for your reply.

    Is it entirely up to the father-son agreement what the annual repayment is?

    Let's say the son agrees to pay 15k per annum over 20 years. Can he take advantage of the small gift exemption and only pay 12k per annum even though the loan is reduced by 15k?

    The repayments can be what ever you wish them to be, however interest must be accounted for according.

    Regarding the loan repay of 15/12 yes this can be done however to be recorded annually.


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