Your Questions: I am thinking of selling an investment property, but what about the tax?
Question: I am thinking of selling an investment property I bought in Dublin during the boom. It's a two-bed apartment for which I paid €360,000. While it seemed like a good investment, it's given me nothing but headaches in terms of tenancies and repair issues. It has also devalued in market value by about €40,000 due to local development issues, and I feel ready to cut my losses on it. On the plus side, I had a significant increase recently in the value of a number of shares I own, which if I dispose of, would be eligible for capital gains tax (CGT). If I were to sell up, would I be able to offset any potential losses against CGT due?
Answer: The likelihood in this case is that yes, it would be possible to use the loss on any potential sale of your property against any CGT due on the income from your shares, if you did choose to dispose of either, according to Taxback.com CEO Joanna Murphy. If you make a loss when you dispose of an asset, this becomes an 'allowable' loss, where a gain on the same transaction would be chargeable for CGT.
Allowable losses are set against the chargeable gains of the same year.
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If the losses exceed the gains, the excess may be carried forward against gains of later years, or transferred to your spouse or civil partner, Ms Murphy said. It should be noted that a loss on the disposal of development land can only be set against a gain on the disposal of development land.
Question: Our rented apartment was burgled over Christmas. The thieves got their hands on a new laptop I had bought for my husband, plus a new bracelet he had bought me, among a few other bits and pieces.
We contacted our landlord straight away and she says she has submitted an insurance claim for the damage done to the front door and back window.
But she says there's nothing she can do about our stolen items. Surely she can claim for these on her insurance policy?
Answer: Unless you have your own contents insurance, there is no way a claim can be made in this instance, according to Deirdre McCarthy of Insuremyhouse.ie. Your landlord's insurance policy will only cover his/her interest in the property. The only recourse you might have is if you and/or your husband bought these gifts with a credit card, Ms McCarthy added.
Then your credit card provider might reimburse you for the stolen goods, but you would need to have receipts to prove your purchases.
Question: I am about to turn 75 and am looking to sort out my affairs regarding passing on my house to my daughter and her three children.
I have another son who is settled down with family and a family home. But my daughter, who is a recent divorcee, is having difficulty finding stability again, and I want to ensure that she and my grandchildren have a place that will always be theirs.
What's my best course of action to ensure that they keep the house and also limit any inheritance or gains tax?
Answer: One solution would be to set up a fixed trust, which would apportion your daughter and your grandchildren, the beneficiaries, a specific share each in the property, according to Ms Murphy.
This would alleviate the tax bill, and you can also add a lifetime clause for your daughter to live there, she said.
If the property is left to your daughter for the duration of her life and then passed on to your grandchildren, capital acquisitions tax (CAT) will apply to your daughter.
CAT is applied on gifts and inheritances where the gift value is over a certain limit or threshold. This threshold depends on the relationship of the disponer (the person giving the gift) to the person receiving it.
In this instance, the threshold group would be 'A', meaning a son or daughter of the disponer, Ms Murphy added.
The Group A tax-free threshold was increased in the last Budget, to €335,000 from €320,000, on gifts or inheritances received on or after October 9, 2019.
In your daughter's case, CAT would be calculated on the value of the gift provided, multiplied by the percentage for life interest taken by male/female, less the small gift exemption of €3,000 and the Group A threshold. Your grandchildren will be subject to CAT on your daughter's death. The benefit is deemed to be taken from the original disponer, e.g. you. So the applicable threshold to your grandchildren will be €32,500.
They will also be entitled to the small gift exemption of €3,000.
If you make a loss when you dispose of an asset, this becomes an 'allowable' loss for capital gains tax purposes.
Your landlord's insurance will only cover his/her interest in the property and not the value of the contents of the apartment that you rent.