Capital Gains Tax

monseiur

Mary bought a derelict house on a 2 acre site over 11 years ago at an auction with the intention of doing it up, which never happened due to health reasons. She is the registered owner of the house/site.

As she was unable to get a loan at the time, her sister Susan (who has a successful business) lent her the €50K to buy the house / site. To cut a long story short Mary has a progressive probably terminal illness and hasn't paid back any of the loan.

She has given a choice to Susan that sh'ed gift her the house or else that she'd sell it on the open market and repay what she borrowed + interest. But she's prefer to gift it to her, but does not want her (Susan) to end up paying a huge tax bill.

The house has been valued at €120K approx. but is gradually becoming an eyesore and a subject of complaints so Mary is under pressure to do something soon and is at the same time advised by her doctor to avoid all stressfull situations.

If the house is gifted to Susan what taxes, if any, she'll have to pay.

If Mary sells the house for say €120K. what capital gains tax will be liable for.

If Susan is gifted the house and sells it later, for say €120K, what capital gains tax will be due.

Mary has a medical card and has no other property etc. except the old family home which she inherited. She is worried that if she has say €40K in savings after sale of house she may lose her medical card which is precious to her. Both her parents have passed away and she has no other siblings.

Thanks all.

ari101

Re medical card, my understanding is if terminally ill with <2 years expected life the means test is disregarded... Maybe someone can confirm.

Depending on age, in a means test for a single person the first 36k of savings and investments is disregarded, the weekly assessed income for the next 10k is only 1eur per week for every 10k. If Mary has only 40k savings, this will add only 4eur to her weekly income for assessment which is very small and hopefully would not be an issue. If there are other savings, or income is borderline, and the card is means tested this could be different. If you look up citizens information website they have a good breakdown of this stuff.

Acquisitions tax exemption: A sister would be Group B related for CAT so any gifts/inheritance the first 32.5k in lifetime could be tax free.

This is where I become unsure...

The interest free loan (that seems not to have been dealt with for tax purposes i.e. taxable notional interest income for Mary) might create problems now, so unsure how to suggest calculating impact...

In any case, if the gain can be recognised by Susan and she has the CAT exemption above available to reduce it, this I believe results in the overall total lower tax situation, not considering the individual parties net outcomes.

If the tax exemption has already been used against a previous gift from Mary, or using it now will mean an expected future inheritance from Mary (e.g. a possible share of the family home) ends up taxed in full in future, the tax advantage of transfer seems to go away.

Maybe someone more knowledgeable can comment on the deductibility of the loan and possible implications.