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Gift/Inheritance tax, Capital Gains issue

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  • 24-04-2008 1:00pm
    #1
    macker83
    Registered Users Posts: 2 ✭


    The background to my issue is last year my folks re-mortgaged their house for 260,000 and the family business was basically paying this silly mortgage of 2,300 a month.
    the marriage has broke down now, the business is finished and now the property is at risk due to this.
    i wont go into the ins and outs of the marriage problems but at the moment the only solution is for me, a first time buyer, to buy the house for 280,000(deposit and 260,000 mortgage) although the house is valued at 500,000. the repayment will be roughly 1200 a month(a lot less than 2300)
    no one in the family wants the house to be sold, so one of the parents will be moving out and the other staying put and paying rent if you like, to me.
    i have been approved by my bank to get a mortgage of 280,000 for this venture and was wondering if i would be eligible to any other hidden costs aside from deposit, mortgage, solicitors fees, possible valuation of the property, life insurance etc etc. ive heard i might be within the gift treshold of 520,000 as the property is valued at 500,000. also i am getting the property for a lot less than the market value, this will not be used by i as a possible profit venture as my whole family will be involved but i am the only one capable of raising the capital at the moment.

    thanks


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    #2
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    First of all, if the house is valued at 500k (which you would need to reliably verify), and you are taking out a mortgage of 280k to take responsibility for outstanding debts secured on the property, your net gain is actually 500-280k=220k, which is well below the threshold.

    You will be expected to declare any rental income (despite the fact that its to a family member) in an annual tax return, and pay income tax on it, after the deduction of allowable expenses (which happily includes mortgage interest). You will not be entitled to claim TRS on the mortgage, as the property will be treated as an investment (unless you are living in it, in which case you could avail of the rent-a-room scheme which would allow you to get up to 10k tax free per annum- but then you would be subsidising the mortgage by almost 5k yourself......

    You really need to sit down with a solicitor and explore all the ins and outs of this transaction- as it has tax and other implications that you may not have considered.


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    #3
    Victor
    Registered Users Posts: 78,399 ✭✭✭✭Victor


    Seriously get independent advice for yourself, separate from any advice given to others. You could probably get it all in one meeting. In something like this, it is just about possible for say other siblings to claim they have been unfairly treated.

    Make sure that the equity you gain is in line with how much you will be spending. Is €500,000 a fair valuation?

    Note that you will be losing your first time buyer rights.

    "any other hidden costs aside from deposit, mortgage, solicitors fees, possible valuation of the property, life insurance etc etc." - all are possible depending on how you structure things. Check the stamp duty situation, but I imagine you are exempt.

    It may also be necessary for you to cover insurance and maintenance costs.


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