Transfer apartment to sister

jennywondering

Hi. I have an apartment with is mortgage free. A similar apartment was sold recently for 280K. I wish to transfer the property to my sister as her permanent home. She has been living there, rent free, for the last 10 months since my last tenants left.

I bought the apartment for E130k in 1996. I am wondering what would be the cost (e.g.legal fees, stamp duty etc). Is it one year's tax reduction between siblings of around E3K. Are there any other clawbacks??

My sister is single, in her 60s and has never owned a property).

(I understand that I need to speak to a solicitor and possibly an accountant but I would welcome some advice and information here.

Thanks

Jenny

Mrs OBumble

Who has been paying the management fees and landlord insurance since the last tenants moved out?

Can your sister afford them, plus the heating etc bills? (I'm not kidding, there can be some older people who cannot afford to run a house, even if bits gifted to them.)

Oscar_Madison

my understanding is that this will essentially be a “gift” - so between siblings you can gift up to 33k or so tax free - after that it’s taxable at 33% - so the balance of the current value would be taxed at 33% giving your sister a tax bill of 70k or so - that would be my take on it but yes legal advice for all sorts of reasons essential here

You could explore putting your sister onto the deeds to see if that would reduce her tax bill at all - ie joint ownership? Would your sister have any funds to put towards either purchase price or for the tax bill?

downtheroad

Your sister living there rent free is technically a taxable gift. You can gift her €3,000 a year free of tax (Small Gift Exemption). If Revenue somehow got wind of it she would owe 33% Capital Acquisitions Tax (CAT) on any "market rent" above the annual €3,000.

Provided she has never received any gifts or inheritances from other siblings, grandparents or aunts/uncles she has a €32,500 lifetime threshold for CAT. You can add the small gift exemption to this. So €35,500 would be free of tax, any balance above that will be taxed at 33%.

Stamp Duty would also be payable on the value of the transfer.

You need to speak to a tax advisor.

Gloomtastic!

wrong thread…..

standardg60

https://www.boards.ie/discussion/comment/122162148#Comment_122162148

How is letting someone live in your own house rent free a taxable gift? Everyone still living at home would be liable so.

OP she would be liable for gift tax so just leave the arrangement as is, why would she need to own it if she's no one to leave it to?

downtheroad

https://www.boards.ie/discussion/comment/122162573#Comment_122162573

I've read it that it isn't the OPs PPR. She mentioned "previous tenants". Sounds like a rental property to me.

standardg60

https://www.boards.ie/discussion/comment/122162636#Comment_122162636

Why would it matter? There is still no obligation to charge someone rent.

Furze99

https://www.boards.ie/discussion/comment/122162573#Comment_122162573

Yes, the OP could surely just let her sister live on there. By all means set a nominal rent that covers the cost of management fees and insurance etc. It's none of Revenue's business afaik, what rents people choose to set.

Sleeper12

https://www.boards.ie/discussion/comment/122162573#Comment_122162573

There is a massive difference between the family home and a rental property.

28064212

https://www.boards.ie/discussion/comment/122162573#Comment_122162573

https://www.revenue.ie/en/gains-gifts-and-inheritance/valuation-date-value-certain-benefits/free-use-property-interest-free-loans.aspx

If you have free use of a property, or for less than its market value, this is a benefit and you may have to pay tax on it

This assumes that the OP is not living with the sister in the apartment. Gifting someone a room is different to gifting someone use of an entire property, so the "everyone living at home" analogy doesn't apply

L1011

https://www.boards.ie/discussion/comment/122162573#Comment_122162573

Because it is.

Maintenance of your own children isn't covered; to a point - but buying them a house and letting them live in it rent-free would be.

downtheroad

https://www.boards.ie/discussion/comment/122162674#Comment_122162674

Tell Revenue that and see how you get on

downtheroad

https://www.boards.ie/discussion/comment/122162677#Comment_122162677

If every house on the street is being rented for €2,000 a month, and the OP charges her sister €100 a month in rent, you can be damn certain Revenue will benchmark the rent and tax it accordingly...if they find out.

jhegarty

https://www.boards.ie/discussion/comment/122162734#Comment_122162734

How does that work with the current rent pressure zones rules ?

If op charges €100 on the month 1 then from month 2 it becomes the legal maximum rent for the property.

standardg60

https://www.boards.ie/discussion/comment/122162687#Comment_122162687

Interesting, to your knowledge has anyone ever been charged tax under this rule?

paul71

https://www.boards.ie/discussion/comment/122162771#Comment_122162771

Because she has only been there for 1 year. Market rent at the time she took up residence is a very fair and reasonable basis for revenue to determine the benefit in such a case.

28064212

https://www.boards.ie/discussion/comment/122162778#Comment_122162778

No. But having not ever been a tax solicitor, accountant, revenue official, or personally involved in such a scenario, I can't imagine how I or the vast majority of people would ever be aware of someone else's tax affairs in this situation.

Also, you aren't "charged" tax under this rule. As with many other taxation rules, you are required to declare it. If Revenue discover that you haven't declared it within the allowable timeframes, you many be subject to penalties and interest

paul71

https://www.boards.ie/discussion/comment/122162778#Comment_122162778

I do, I know of about 20 to 30 over the last 30 years.

downtheroad

https://www.boards.ie/discussion/comment/122162812#Comment_122162812

All it takes is one busy body neighbour. Loose lips sink ships.

Local Property Tax records, rent tax credit claims, vacant homes tax - plenty of ways for Revenue to find out who is living where.

28064212

https://www.boards.ie/discussion/comment/122162771#Comment_122162771

The gift rules aren't affected by the RPZ rules. The gift is considered to be the difference between what is being paid and what is market value. The RPZ rules mean you can't immediately increase the rent to what actual market value would be, so the gift tax would be liable for as long as the rent continues to be under market value

standardg60

https://www.boards.ie/discussion/comment/122162812#Comment_122162812

Really? And how has this tax been enforced if the receiver of the 'benefit' has no money.

paul71

https://www.boards.ie/discussion/comment/122162867#Comment_122162867

The same way all tax is enforced by the state.

Water John

Can the OP simply grant the sister a right of residence, or conversely maintain a right of residence themselves?

SteM

https://www.boards.ie/discussion/comment/122162778#Comment_122162778

I know of a lady in south county Dublin that has received a large tax bill from the revenue as she had free use of a house owned by her mother for 30ish years.

There's one area of government that generally works well in this country and that's the Revenue, they eventually get what's owed to them.

paul71

https://www.boards.ie/discussion/comment/122162890#Comment_122162890

There are legal ways to minimize the tax impact. Deeds of covenant can be effective depending on the individual circumstances.

Buddy Bubs

https://www.boards.ie/discussion/comment/122162891#Comment_122162891

Was her mother alive or dead for those 30 years?

It's an unusual one given that you can inherit or be gifted 300k+ from a parent

Water John

By the OP keeping a right of residence, the gift would be dramatically reduced in value. Not sure would the OP have to justify their reason for it to the Revenue?

standardg60

https://www.boards.ie/discussion/comment/122162872#Comment_122162872

Which is in such a particular case?

Furze99

https://www.boards.ie/discussion/comment/122162734#Comment_122162734

Let's suppose this apartment is owned by the OP and used for her family and friends pleasure and convenience. There are a good many well enough off people who have a house or apartment somewhere that they make available to friends and family. Surely in this case, the OP can facilitate whoever they want use it and it's none of Revenue's business at all. We've borrowed such a house from time to time, no holiday rent paid - none of Revenues business.

If my brother comes and cuts my grass out of the goodness of his heart, it's none of Revenues business that he hasn't charged me and hasn't paid tax on it. Ditto for child minding etc etc. Life is full of arrangements like this between family and friends.

In this case, why can the OP not just let her sister live there and come to some arrangement between them as siblings as to costs of maintenance etc. I can't see any role for Revenue in such an arrangement?

But the OP should get advice on this from professional in the field.

paul71

https://www.boards.ie/discussion/comment/122163021#Comment_122163021

Comparing a weekend guest stay or the cost of cutting grass to a perpetual rent free place to live is utter nonsense.