Buying house from parents…

Hi folks, I’ll be speaking to broker shortly but wanted to get some opinions on our situation and the best way through it!

We (wife, child and I) are living in a house owned by my parents. Have been doing for 8 years and always with a view to buying. Siblings aware and all on board etc, open and transparent the whole way.

Essentialy, we want to figure out how to minimise the CGT liability of my parents in the sale as the market value of house would have increased since they purchased (eg bought for 200 15/20 years ago and similar selling for 250/260 of late.

Parents would be of the opinion that they’d gift the house in the morning and we could make an agreement to pay back over x years, but to be honest I’d rather buy and see them with a nice lump sum to blow through, and for the sake of siblings etc everything is above board, done and dusted. Nice and clean!

Anybody been through similar? Would be interested to hear how it worked out.

Thanks in advance!

Kurooi

Did they ever live in it? How long?

If you're quoting real figures (200k bought, 250/260 value now) I'd also explore the option of just trying my luck with estate agents. If they value it low you can use that valuation.

I had that experience. Brought one over wanted to under value my own house, couple of complaints about the heating being broken, windows single glazed, house needs rewiring.... wink wink. He valued it some 50k under market.

https://www.boards.ie/discussion/comment/120162428#Comment_120162428

Thanks for response!

No, they never lived in the house - it was an investment property they bought after a small inheritance years ago themselves.

What you've said is pretty much along the lines of what we're thinking - auctioneer will give a run through the place with us and take into account jobs we're planning on doing to drop the market value; it shouldn't be too much of a stretch - with allowable expenses offset against CGT, it's working at about 230k before they'll be liable so I'm sure we can drop the valuation to that very handily.

eusap

Easiest option is to pay them what they paid for it, then there is no capital gain. Even if estate agent values at 60k more that part can become a gift from parents to you.

If you choose to pay the 60k back to parents you and partner can gift 3k to each parent each year 12k x 5 years 60k paid legitimately

Marcusm

https://www.boards.ie/discussion/comment/120164290#Comment_120164290

Utter rubbish; it would be a non-arm’s length transaction and CGT would be calculated by reference to open market value with less ability to control that. The CGT might be able to reduce the CAT but as it’s less than the lifetime limit it’s likely to be a cost in any event but one where you have substantially less influence over the price which Revenue might seek to apply.

eusap

BUT open market value is whatever the estate agent or two says it is, they will put what you want on the valuation especially if it is less and reduce the CGT to ZERO or a modest gain

CAT won't be due as they are paying for the property and if they wanted to be fair and pay the 60 they can utilize the annual gift allowance

Marcusm

You said pay them what they paid for it irrespective of what a valuation is which is why your advice was rubbish. If the OP obtained some valuations and used that as a basis for deciding what is paid then they have an element of control with Reveneu. Simply putting in the original purchase price, asserting it was the value without any support would not just leave it open for Revenue to seek a higher than reasonable valuation but expose the OP’s parents to penalties for failure to make returns which are correct and complete. Bar room tax advice is not permitted on boards.

https://www.boards.ie/discussion/comment/120165035#Comment_120165035

Yeah, this pretty much ties in exactly with the advice we've had from accountant on the issue - it won't be an issue getting an auctioneer to come in and put the value on the house that we need to pretty much take CGT out of the equation - we're not taking the piss or anything on price and have the research done on other sales in the estate which supports our case should revenue come knocking down the line.

Claw Hammer

The easiest thing would be for the parents to leave the house to you by will. CGT dies with the owner so that would sort it out. You can each give the parents 3k per annum until they die to pay for their SKIing.