Aggreate Figure

torrevieja

Can somebody help me out with this query , a house that is Valued at the time of the persons death at €440,000 and there are 4 siblings two living in the house what is the  the threshold on gifts or inheritances between siblings is there an an aggregate figure,

I would d like to buy the other two siblings share so i will own 3/4 of the house with the agreement of the other sibling living in the house, as it stands each person would be entitled to €110,000 each , what offer can be made to the siblings that avoids tax on me

Thanks

Peregrinus

Assume that the house belongs to a parent of the four siblings — A, B, C and D.

Assume that the four siblings inherit the house in equal shares. Each inherits a share worth €110,000.

Assume that they have not inherited any other signficant amount from either of their parents. An inheritance of €128,000 is well within the CAT threshold of €335,000 for inheritance from parents, so none of the four siblings have any CAT liability on their inheritance.

Right. Sibling A buys the shares of siblings B and C. He pays them €110,000 each. He is not making any gift — this is a sale for full value, not a gift, so no CAT arises. The purchase will attract stamp duty of 1%, for which A will be liable, and the usual conveyancing costs — legal fees, registration fees, etc.

torrevieja

https://www.boards.ie/discussion/comment/121886503#Comment_121886503

yes but say he doesnt want to pay €110,000 each how low can he go before he is taxed ( of course that B and C agree to that Price)

Claw Hammer

The group B threshol;d is 325,00 plus the small gift exemption of 3k.. If the siblings are willing to take about 75k each it might be possible to avoid CAT. The normal way is that the per rep sells the house to the o/p and the o/p hands over 3/4 of the purchase price which money is then split 3 ways between the other siblings.

torrevieja

Hi Claw,

So What your saying Claw is if, I (A) Give (B) and (C) €75,000 each I should be able to Avoid CAT as (D) will be staying in the house too

Peregrinus

The group B threshold is €32,500. That allows A to receive gifts from B and C with a total value of €32,500, not €32,500 from each of them. Assume that A has never previously received any gifts or inheritances that would use up any of the Group B threshold.

Plus, there's a small gift exemption of $3,000.

So, A is getting shares in the house with an aggregate vale of €220,000 from B and C. He can receive up to €35,500 by way of gift without incurring any liability to inheritance tax. Therefore he needs to pay for the rest. So the amount he must pay is €(220,000 - 35,500 =) 185,500, or €92,750 to each of B and C.

If the object here is to minimise the amount A has to pay while avoiding any CAT liability, part of B & C's share in the house, up to the value of €35,500, couild be gifted to D (assuming, again, that D has never previously received any gifts or inheritances that would use up any of their Group B threshold). In that case the deal would look like this:

B and C between them own a 50% interest in the house, worth €220,000.

They gift a 7.4% (approx) interest in the house to D; value is €35,500. D has no CAT liability.

They gift a 7.4% (approx) interest in the house to A; value is €35,500. A has no CAT liability.

They sell the remaining 35.2% (approx) interest in the house to A; value is €149,000. A pays the full value, so no CAT liability.

A ends up owning 60.2% of the house; D owns 39.8%. Neither has any CAT liability and A only has to lay out €149,000 instead of €185,500. But B and C are worse off, because they only get €149,000 instead of €185,500.

On edit: We're looking at this exercise in terms of minimising A's liability to CAT (and possibly also D's). But neither A nor D can have any liablity to CAT unless B and C make gifts to them. So the real question here is not how much CAT do A and D wish to pay (obviously, none) but how generous do B and C wish to be? How much to they wish to give away for nothing?

If they wish to make gifts of up to €71,000 to A and D, they can do that in such a way that the recipients pay no CAT; if they wish to give away more than that, some CAT liablity is inevitable. But it strikes me as unlikely that the amount B and C wish to give away will be determined by how much the CAT liablity (which they won't have to pay) will be. Other considerations are likely to weigh more heavily with them.

Plus, if B and C are willing to make a gift that would result in a CAT liablity, it would be irrational for A to refuse. For every €1 of CAT liability that he wants to avoid, A must pay pay €3 to B and C.

torrevieja

https://www.boards.ie/discussion/comment/121890877#Comment_121890877

Thanks well explained

Claw Hammer

It seems from this that D is not getting a gift as he already owns 1/4 of the property. A is getting 3/4 so in fact A, avoiding tax can only get 38500 off 22000 before incurring a liability so B and C each get 50% of 183,500 or 91,750 each

Peregrinus

https://www.boards.ie/discussion/comment/121893319#Comment_121893319

If B and C give their shares in full to A then obviously D is not getting a gift.

But if the objective is to avoid CGT, while minimising the amount A has to pay, then there is the alternative strategy whereby B and C give part of their interest in the property to D — enough to take advantage of D's Group B threshhold — and only give the balance of their interest to A. By splitting the gift between A and D, two threshold amounts can be accessed instead of just one. That reduces the share of the property for which A has to pay.

Claw Hammer

https://www.boards.ie/discussion/comment/121895490#Comment_121895490

A wants to end up owning 3/4 though.

Peregrinus

It seems to me that the salient question is, what do B and C want? They are the ones who are making gifts here. A is minded to reject any gift which will incur a gift tax liability for him, but in that circumstance B and C may be happy to offer the rejected gift to D instead, if D has the capacity to receive it free of CAT.