How to value the site attached to an existing corner house?

ircoha

Background.

Bought a semi-d house corner house 20+ years ago for euro 25,000.

House was never a principal private residence.


Last year I divided the site and built a detached dwelling on the corner site.
Construction costs of c 250k

Houses in the estate were valued at about 430k at the time, now about 390/400k.

Now selling the new house at c 420k

2 questions.

How do I value the site for cost purposes in the calculation of the total purchase price for the Capital Gains tax calculation?

What effect does dividing the site have on the cost of the original house for CGT purposes?

Thanks.

Time Magazine

Moving from Investments. OP, you're more likely to get an answer here.

Victor

You really need to talk to someone who deals with this on a professional basis.

Potentially:

1. Place a current construction value on each house.
2. Deduct the combined construction value from the combined sales value to get the site value.
3. Measure the area of the site.
4. Allocate the site value on a square meter basis.
5. Add the site value to the construction value.
6. Note that some adjustments may need to be made if one can be construed to have advantages over the other, e.g. one might have space for a driveway, the other might not.

ircoha

Victor wrote:

You really need to talk to someone who deals with this on a professional basis.

Potentially:

1. Place a current construction value on each house.
2. Deduct the combined construction value from the combined sales value to get the site value.
3. Measure the area of the site.
4. Allocate the site value on a square meter basis.
5. Add the site value to the construction value.
6. Note that some adjustments may need to be made if one can be construed to have advantages over the other, e.g. one might have space for a driveway, the other might not.

Interesting ideas here Victor, thanks. I like it because it has a logic that can be argued with the Revenue.

Given that everywhere you look people are doing what I have done so I would have thought that there was a model out there. There is nothing on Revenue site.

Victor

You might talk to your solicitor or find an accountant who does this type of stuff, as it is ultimately a tax return that you will be doing.

ircoha

Victor wrote:

You really need to talk to someone who deals with this on a professional basis.

Potentially:

1. Place a current construction value on each house.
2. Deduct the combined construction value from the combined sales value to get the site value.
3. Measure the area of the site.
4. Allocate the site value on a square meter basis.
5. Add the site value to the construction value.
6. Note that some adjustments may need to be made if one can be construed to have advantages over the other, e.g. one might have space for a driveway, the other might not.

Victor, reflecting on this overnight, it strikes me that if we estimate a profit margin in the combined sales values then we have a workable model.
Otherwise the site value will contain the profit margin and that will in effect reduce the CGT exposure on the sale of the 'new' house, something the Revenue would not be happy with.

However as I said already you have set out a workable model here for which the forum should be grateful.
I know I am!
.

Victor

I'm not sure what you mean, but let me put some numbers on different models.

Do-more

Most commercial builders work on a ratio of one-third site cost, one-third build cost and one-third profit. More often expressed as "Build three and you've one for free"

I'm guessing you had a contractor to build the new house and therefore he has lopped on a handsome profit onto the one-third build cost, thereby bringing your total build cost to 250K.

The actual built cost would probably have been closer to 140K, with 140K to site cost and 140K profit.

Real back of a fag packet calculation! :eek:

OTK

ircoha wrote:

Background.

Bought a semi-d house corner house 20+ years ago for euro 25,000.

House was never a principal private residence.


Last year I divided the site and built a detached dwelling on the corner site.
Construction costs of c 250k

Houses in the estate were valued at about 430k at the time, now about 390/400k.

Now selling the new house at c 420k

2 questions.

How do I value the site for cost purposes in the calculation of the total purchase price for the Capital Gains tax calculation?

What effect does dividing the site have on the cost of the original house for CGT purposes?

Thanks.

This is art. It just has to hang together and look normal.

Purchase price: 25K in say, 1987
Decide what the garden was worth then, say 2.5K
You can increase this amount by inflation (general inflation - not house price inflarion). The multipliers are listed in this revenue table.
Sale price of new house = 420K
Cost of building house = 250K
Other costs associated with building the house and then selling it including estate agent and legal fees = 5K
Personal CGT allowance = 1.27K
Gain = 420K- 2.5K * 1.5 (The CGT multiplier) -250K - 5K - 1.27K
= 160
CGT @ 20% = 32K

As for your other house. Take the sale price and start by subtracting 22.5K (25K less value of garden) multiplied by the CGT index.
Subtract any money you spent enhancing it, acquiring it and disposing of it.
This is your gain. Multiply by 20%

Send cash to revenue.

Feel warm glow.