Q&A

I purchased a new apartment in June 2002 and availed of the first-time buyer grant and nil stamp duty.

Property and marriage

My boyfriend and I are considering getting married next year. He also owns his own home (his second private dwelling house purchase so he paid stamp duty at 5 per cent in 2002).

I know I have to retain my property for five years as principal private dwelling in order to ensure no clawback occurs. Does this five-year covenant also apply to purchase of non-first time buyer property?

In the event of marriage next year, and if we wish to keep the two properties with one as principal residence and other as rental property, how would the Revenue view this? Would clawback occur?

If it was necessary to sell his property and there was a capital gain, could this be used to reduce the borrowing on my house to avoid a capital gain, as it would then be his private?

Ms E.C., email

Starting at the beginning, the clawback arrangement on stamp duty applies only to first-time buyers as they are the only ones who get relief from the duty. Your boyfriend has paid the full stamp duty for which he was liable and therefore the issue of clawback does not arise.

Should the two of you get married next year, the only issue of concern to the Revenue is which house will become your principal private residence.

If it is your house, there is no problem. You can rent out your boyfriend's property, though you will naturally be liable to income tax on the rental income after allowances.

If, however, you decide to make his property your main abode, the Revenue may well look to claw back some of the stamp duty relief granted to you when you bought the property last year.

There is no capital gains tax on the sale of a principal private residence so either of you could sell your homes free of that worry. However, if you do decide to rent out your boyfriend's house, you will be liable to capital gains.

As I said in the original column, the Revenue will calculate the portion of the ownership of the property during which it was rented and, broadly, charge capital gains on that portion of any gain when it is eventually sold.

Mr V.S. and Mr J. McG. both contacted me thereafter to point out a provision in the capital gains tax code that grants principal private residence relief for the last 12 months of ownership of the property regardless of whether it is let during this period as long as the property was, at some stage, the seller's principal residence.

If capital gains does arise on any eventual sale of your boyfriend's property, you cannot offset it against your mortgage.

They are two separate issues and the fact that your home would then also be his principal private residence is irrelevant.

Capital gains

Just wondering how do I/we stand in relation to CGT with the following query: My wife has just been bequeathed a BOI Asset Man. share(s) to the value of 6,000 approx. from her brother in Germany. Does my wife now have to declare same ?

Mr J.K., email

The simple ground rule is that you have to declare on your annual return anything that contributes to your income.

Ownership of the share in itself will not make you, or in this case your wife, liable to an annual return disclosure. Your wife will already have addrerssed any inheritance tax issue that might arise.

However, any income earned from the share will have to be noted on an annual return. This would most commonly be income via a dividend from the company on an annual or bi-annual basis.

From the point of view of capital gains tax (CGT), the issue will only arise when your wife disposes of the share.

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.