Property instead of cash award?

.Wondering what are the implications in a family situation where the court orders a payment of say €300k and property to that value is offered by the other party as settlement. What tax implications are involved? Thanks

Peregrinus

This is a complicated question; it depends on what the property is, and on what the tax consequences would be if it were disposed of or transferred not in the context of a settlement on marriage breakdown. So if you could be a bit more specific about exactly what you have in mind, you might get more targeted and useful answers.

A general rule of thumb, though, is that, if you're going to do this, have an order for the transfer of the property incorporated into the court order. This will insulate you from a lot of the immediate consequences of disposing of or transferring the property in question. But you will still need proper professional advice on the longer-term tax consequences of having done this when, e.g., the property is later sold or bequeathed to someone.

https://www.boards.ie/discussion/comment/119942945#Comment_119942945

Thanks. I had loaned money years ago to a relative, and unfortunately had to issue legal proceedings. Relative now offering a house approximating the value of the loan.

Peregrinus

Oh, Ok. Not a marriage breakdown situation at all.

You'll have to pay stamp duty (and legal costs and registration fees) on the value of the house, obviously. And, if what you actually want is money, you'll then have the costs (and trouble) of selling the house, plus the risk that house prices may move and you won't get what you hope. But those are not, strictly speaking, tax costs. if you don't sell the house you'll have the ongoing cost of insuring it, maintaining it, etc plus (if you let it out) the tax consequences associated with receiving rental income. But those are not tax consequences of the transfer itself, but of the subsequent letting.

The transfer may involve tax costs for your relative. Assuming the house is not his home, on disposint of it for a value which (presumably) exceeds the cost to him of acquiring it, he will incur a liability to capital gains tax. His problem, not yours, but if he hasn't factored it into his thinking it at least creates the risk that the whole deal may fall over when this aspect of it comes to his attention.

You say that the house "approximates" the value of the loan. I imagine in fact that it's pretty close as, if there were a large difference in value, one or other of you would find the idea very unattractive. So probably if you value the house for tax purposes as equal to the value of the judgment, the Revenue will accept that; it's close enough to true.

But, if it isn't true:

If the house is worth much more than the judgment then, in giving the house to you your cousin is in fact making a gift (of a value equal to the difference between the judgment and the house) and that has gift tax implications for you. (Unless you make a part-payment for the house, so as to equalise things.)

If it's the other way round, the house is worth much less than the judgment, then in accepting the house in settlement of the judgement you are making a gift to him with, again, gift tax implications.

But, almost certainly, neither of these is going to arise, since neither of you has any reason to be conspicuously generous to the other.

seagull

Are you happy to take the property? Otherwise, have him sell the house, and then he can use the proceeds from the sale to repay the loan.