Q&A

Your financial questions answered.

Taxing issue of selling the family cottage

My father signed over his cottage to me in 1992. It was valued at £32,000. He has recently gone into full-time care. I would like to sell the property.

Would I be subject to tax? If I held on to the property for some years after his death, would I be liable then?

Mr D.T., e-mail

It sounds from your letter that your father has continued to live in the premises since he signed it over to you back in 1992.

However, assuming ownership of the cottage was transferred to you at that time and that it has not been your principal private residence in the interim, you are certainly likely to be liable for capital gains tax.

That is true whether you decide to dispose of the house now or after your father dies.

The provision to which I think you are referring, in relation to holding on to the property, is a measure introduced into the capital acquisitions tax regime by Charlie McCreevy.

However, it is probably more commonly known as inheritance or gift tax .

This allows close relatives with no other property interests to receive ownership of a home in which they live without paying tax, as long as they continue to reside there for a further six years.

It does not affect capital gains tax for the period after ownership is transferred. As long as this is not your main home, capital gains will be levied at 20 per cent on the difference between the value at the time ownership passed to you, and the value at the time you dispose of the property.

You will be able to adjust upwards the transfer price back in 1992 to account for the impact of inflation between then and the end of 2002.

However, given the exponential increase in property prices in the past decade or so, you are still likely to face a significant tax bill.

House swap

I was widowed and remarried three years ago. After marriage I rented what was my family home. My daughter was married last year and she and her husband purchased a new home.

For the purposes of this exercise my house is worth €650,000 and my daughter and son-in-law's house is worth €400,000.

I would like to swap my house for their house, and divide the net excess after my expenses between my daughter and son.

Apart from legal costs there are the various tax implications to be taken into consideration - stamp duty, capital gains tax and gift tax. I would be most grateful if you could advise on the tax implications.

Ms C.McK., Dublin

I'm not entirely sure what you are looking to do, but you will need more information to determine the tax bill. Effectively, you are "gifting" your daughter and son-in-law €250,000 - the difference between the two house values.

That is well within the capital acquisition tax (CAT) threshold from parent to child (€466,725), but in excess of the threshold for gifts to a son-in-law (€23,336). So you will need to be careful in phrasing the gift to ensure your daughter and her husband face no tax bill.

A 50:50 split would see him paying CAT of just over €20,000. However, on the issue of capital gains tax, you will have a certain liability. While the house was your home until you remarried, you did rent it for the past three years.

The last year of ownership is discounted, but you will need to apportion any capital gain between the remaining two years the property was rented and the overall period of ownership. If the house was owned for 20 years, capital gains tax would be due on two-twentieths, or 10 per cent of the gain.

Missing company

I recently discovered some old Barymin Exploration share certificates which belonged to my late father. I have been unable to trace any record of what Barymin might now be called and I wonder if the certificates have any value?

Mr F.L., Dublin

Yet another lost company. As recent correspondents have discovered, some old share certificates may well be worth money as the companies have been taken over, renamed or are otherwise still trading. However, like you, I can find no current mention of Barymin.

Following the discovery of one of the world's largest barite mines, the company's name was changed to Barymin Co Ltd and later to Barymin Exploration Ltd.However, the last mention I can trace of the company is in Canadian company office records, which say that it ceased trading in October 1985.

Now, it is possible that the share capital was transferred to another company before that time and the original group allowed to die, but I think it is unlikely.

Still, it costs little to check and I would suggest you e-mail the customer service people at the Toronto Stock Exchange (info@tsx.com) before letting go of the share certificate.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.