Deed of Partition on jointly owned property

Mags mags · 24-05-2020 9:58am #1

If I purchase a property jointly with a sister, a house with a site in side garden. Both single, both with properties to sell. Sister will live in the house, I intend to build in the side garden. What are the tax implications to partition the site if we jointly own the property?
Any advice appreciated

Calahonda52 · 25-05-2020 11:15am

It's not clear from your post but will you both jointly own the whole investment, c/w the second house.
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Mags mags · 25-05-2020 2:21pm

Hi, thanks very much for responding. We will jointly purchase the property with the adjoining site. Currently we each have our own principal private residence. We intend to sell each private residence, live in the jointly owned property(with the attached site) and then I will build in the adjoining site with funds from the sale of my PPR. My sister will live in the existing house.
We are unsure of the tax implications, if any, when we need to partition the site.
I hope that makes sense....
Thanks again.

Calahonda52 · 25-05-2020 5:51pm

Is it a separate site or part of the garden of the existing house?
Is the whole lot more than an acre?
See page 15 here
https://www.revenue.ie/en/gains-gifts-and-inheritance/documents/cgt1-guide.pdf

Mags mags · 25-05-2020 6:22pm

Thanks again, yes it is part of the same site, also less than one acre. Small side garden site.
Thanks also for the link. Much appreciated

Calahonda52 · 25-05-2020 7:39pm

Is there precedent for planning for the second build?

Mags mags · 25-05-2020 8:52pm

Other infill developments in the area approved. My concerns were really about the implications of partitioning the site and any tax liability that may ensue. Thanks for your input.

thegolfer · 25-05-2020 11:29pm

Mags mags wrote: »

Other infill developments in the area approved. My concerns were really about the implications of partitioning the site and any tax liability that may ensue. Thanks for your input.

You are jointly purchasing the house and site, though your value of the property, the site, may not be equal to your sisters share, the house. The 50/50 basis of apportionment is this unequal in that the you most likely have over paid for a site, and your sister under paid for a house.

Total costs say 200000.

House worth say 150000, but paid 100000.
Site worth 50000 but paid 100000.

The under payment for the house would be seen as a gift to your sister from you to the value of 50000, and resultant tax liability for her. In effect you are gifting her value of the portion of the house.

The site payment may have no implications as selling the site will still realize 50000, as you have paid 50000 for it, having gifted 50000 to sister to acquire house.

I would ask for a valuation of the site and house separately so that you can apportion correctly between you and sister.

It may throw up further issues, and the simpler approach may be to draw up an agreement between you in order to say create a loan repayable to you from the sister, over a period of time, to balance out the monetary position.

This may be an over simplification of the position.

Stamp duty will also apply.

Mags mags · 26-05-2020 8:58am

Thank you, that’s very helpful, much appreciated.

Deed of Partition on jointly owned property

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