CGT on Transfer from Father to Son

missOneill · 09-09-2016 11:03AM #1

Hi,

Looking for some help/advice as we are up the walls!

My husband's father inherited his own parent’s (husband’s grandparents) home after his father passed away in 1994 with a condition that his wife (father inlaw's mother) was to live there until she passed away.

Father inlaw had his own separate principal property with his wife.

The mother passed away in 2011

Father inlaw gifted the house to my husband in 2011 (he was single then) but never legally did so (the deeds remained in Father inlaw name) and husband moved in.

Husband is now trying to get the deeds put into his name as we are going for a mortgage on the house to renovate and extend it and the bank needs the deeds in his name, however the solicitor is claiming that the father inlaw will have to pay capital gains tax when gifting the house to son (as it isn't his principal private residence)

Obviously Father inlaw won't pay this as there is no benefit to him, so it will be up to us.

Is there any way around this seems as my husband has lived in the property for over 5 years and we are looking to upgrade the house and not sell it for a profit?

Also, if there is tax due and the property is valued at €95,000 today, is the 33% CGT payable on the 1994 value of €45,000 or 2011 value of €75,000?

barneystinson · 09-09-2016 11:19AM

This is a case where you will get what you pay for, advice wise.

The tuppence worth from randomers on an Internet forum aren't worth a damn, but if you pay a few hundred for the proper advice from someone well versed in this stuff, it'll definitely be worth it.

/thread

missOneill · 09-09-2016 11:24AM

Hi, thanks for that. Is it possible to point me in the right direction?

CIARAN_BOYLE · 09-09-2016 11:40AM

CAT could also apply. Professional advice is definitely needed.

Geuze · 09-09-2016 01:06PM

missOneill wrote: »

Hi, thanks for that. Is it possible to point me in the right direction?

CGT

http://www.revenue.ie/en/tax/cgt/index.html

Geuze · 09-09-2016 01:07PM

missOneill wrote: »

Hi, thanks for that. Is it possible to point me in the right direction?

CAT

http://www.revenue.ie/en/tax/cat/index.html

Geuze · 09-09-2016 01:11PM

missOneill wrote: »

Also, if there is tax due and the property is valued at €95,000 today, is the 33% CGT payable on the 1994 value of €45,000 or 2011 value of €75,000?

Yes, your FiL may face a CGT bill on the disposal of a second property.

CGT is charged on the gain between time of acquisition and time of disposal.

The 2011 value seems irrelevant, as your FiL did not actually dispose of it that year.

BoatMad · 09-09-2016 01:15PM

I would agree. On the facts presented CAT will apply and will apply at the valuation on the transfer date ( definitely not the intended date )

( in one way you're lucky as in effect had the transfer occurred there would be a tax penalty issue )

Given the sums involved , seek out a good commercial auditing firm that has a tax specialist. , don't rely on your local solicitor

dbran · 09-09-2016 04:19PM

Firstly, get professional advise as there is significant amount of money involved here.

Secondly CAT may not apply as you may be covered under S86 Dwelling House exemption as you have lived in it for a period of 5 year prior to the inheritance and it has been owned by FIL for more then 3 years before the inheritance, provided you intend to live in the house for a period of 6 years after the gift. Even leaving this aside the inheritance itself may be below the lifetime threshold from father to son and there would therefore be no CAT to pay anyway.

Thirdly, there is no CGT on a death so if you were to arrange for the property to pass on the death of your FIL to your husband there would be no CGT to pay. This would mean putting off the renovations for a while or seeing if the bank will agree to some kind of undertaking or other.

dbran

BoatMad · 11-09-2016 11:25PM

My view , based on the dwelling house exemptions , is that your husband will not meet the requirements that exempt him from CAT ( note that unless your husbands father is dead , this is a gift tax issue) , unless he can show he was living there for 3 years previous , AND his father was not living there during those years ( unless a case can be made and sustained that his father depended on his care ).

If however your husband can sustain a claim that he was living in that house for three years prior to the transfer and his father was not resident there then the ex exemption would apply.

In all cases your husband cannot be a beneficary to another home. ( ie own his own home etc )

If all that is required is to raise a mortgage. It may be simpler to see of the bank will award it with you , your husband AND his father all party to the loan , it's a lot harder these days to arrange these kinds of things but I would talk to the bank.

As always seek professional advice

CGT on Transfer from Father to Son

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