I have a query regarding a jointly-owned property with my sister. We bought it in 2008 for €390,000, and are joint tenants.
My sister has pretty much never lived in the property and has not contributed towards the mortgage. I have about €320,000 outstanding on the mortgage. I expect it could sell for approximately €360,000.
I am wondering if, in the event of sale, would there be a capital gains tax on my sister's portion? Also, if she gifted that portion to me would I be liable for tax?
Finally, is it possible to change the nature of the tenancy, such that I could be listed as, say, owning 90 per cent, and would that have any bearing on tax, etc? Many thanks.
Ms S.C., email
Shared assets are always a sensitive subject, even more so within families. However, from the tone of your letter, I gather there is no dispute or rancour between the two of you – simply a factual position where, though you bought jointly, you have effectively been the sole occupier and person paying down the mortgage.
That is just as well, as disputed shared ownerships can be a nightmare to resolve.
So, assuming that to be the case, let’s look at the three issues involved here.
First, would your sister be liable to capital gains tax (CGT)? You say she has never really lived in the property, so I am assuming that it is not her home and that she has another property that is her home. In that case, this is an investment property from her point of view and she would be liable to CGT – if there was a gain.
However, from the figures you present – the property was bought for €390,000 and might now sell for €360,000 – you would be nursing a loss of €30,000 before expenses between you, so no CGT applies. The balance on the mortgage is irrelevant for CGT purposes.
If she owns no other property but has been living elsewhere, it would still be her principal private residence and, as it was never rented out, she would not be liable to CGT at all.
What about you, if she gifted a portion of the property to you?
Well, that is more complicated. Any gift of a share in the property would count towards the lifetime limit of tax-free gifts and inheritances you could receive from her, or any other sibling or linear relative (grandparent, uncle/aunt etc). The limit is currently just €32,500 so, as you can see, any transfer of a substantial portion of the property would take you over the limit and subject to capital acquisitions tax at 33 per cent.
Okay, so to your final question: how about juggling the shares that you own in the property?
That's also a problem. As tenants in common you could own differing shares but as joint tenants the shares would be equal. Your precise status and the shares you own in the property would be contained in the title deed, so there's no escaping that.
Anyway, the bottom line is that your are selling for less than you bought the property for. On that basis, with no tax due, why would you worry about your sister gifting shares in the property to you, or juggling the shares each of you own?
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
