Please send your queries to Dominic Coyle, Q&A, The Irish Times, 11-15 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.

Bacon report

I bought a house two years ago and am currently living in it. I have recently married and my wife owns her own apartment. She is now living in the house with me. We have been thinking about renting her apartment. What are the tax implications of renting the apartment particularly in light of the recent Bacon report? Would we be better off selling the apartment? What would be the tax implications of holding on to the apartment and selling in a couple of years?

Mr D.D., e-mail

You will be glad to hear that the one thing you will not have to worry about is the Bacon Report. It applies only to property bought after June 15th last. As both your house and your wife's apartment were acquired before then, the anti-speculative tax and stamp duty rules brought in in the wake of the third Bacon report are not an issue for either of you.

That aside, the rules relating to the apartment are simple, unless of course it falls under one of the special investment schemes available in recent years. Any rent you earn from it will be treated as income after the deduction of allowable expenses - such as agents' fees, maintenance and repair, etc. If and when you sell it, it will be liable for capital gains tax for that portion of your wife's ownership during which it has not been her principal private residence. That is the case whether you sell now or later as the rules now stand. As Bacon has shown, the rules in the housing sector can change rapidly but it is unlikely there will be much movement in the short term.

So, in summary, don't sell the apartment because of Bacon. Indeed, if you do sell it, remember that any future purchase of a second property may well be penalised under the new rules.

I was a little confused by your response to a reader's question on the implications of the Bacon Report, perhaps because I am unaware of the exact definition of some of the terms used in this regard. You stated that "the determining factor for property owners is the location of the property and whether it is the owner's only property". You go on to state that it does not matter whether "the principal private residence is in the State or elsewhere" and finally you state that "those people looking to buy a holiday home to be kept vacant apart from occasional visits from themselves and friends/family will be hit by the new rules" (i.e. 9 per cent stamp duty and 2 per cent anti-speculative property tax for the first three years of ownership). My question is what is now the situation for an Irish citizen, living abroad in rented accommodation, buying property in Ireland after June 15th last (for future personal use and not intended for letting) without owning any other property anywhere? Is such a person now classified and treated as an Irish first-time buyer acquiring a principal private residence or a foreign speculator acquiring an Irish holiday home for speculative purposes?

Mr D.G., e-mail

Trying to simplify these things can sometimes make them even more confusing and for that I am sorry. Your position and that of many other Irish people living outside the State and looking to buy here is simple. If you do not already own a home and are buying in Ireland, you will not come under the new rules, as this will be your only property. For the purposes of Bacon, you do not have to consider the new tax regime unless you own more than one property and one of them is in Ireland.

The question of residence may, of course, have other implications tax-wise outside of Bacon. However, if you have not previously owned a house, you would be eligible for first-time buyer status. If you have owned a house before, wherever, you would not be eligible.

It is perfectly possible to be a tax resident outside of Ireland but still own a home here without coming under the new rules as long as you own no property elsewhere. What you rent is a different matter.

Stock options

I receive stock options as part of my benefits package from work. At the moment these are charged at 44 per cent benefit in kind. I have heard there are moves afoot to reduce this to 20 per cent as in capital gains tax because it is argued that it is an investment in the company you are working for. Is this going to happen in our lifetime?

Mr C.R., e-mail

Aha, there's a question. It is entirely in the hands of the Minister for Finance, Mr McCreevy. Certainly, there is increasing pressure from new technology companies and those employed in them - where stock options can form a significant portion of earnings - to have such options treated as capital gains rather than as benefit in kind. It is argued that such options are essentially an investment in the company by the employee.

If I had to guess, I would say the Minister is going to have to tackle the issue in a way which will benefit those holding stock options. Whether that happens in the next Budget or thereafter is a political issue. Quite simply, to a large number of people out there, stock options are seen as the preserve of the fat cats - those at the very top of the corporate tree. As such, there is little sympathy politically for more favourable tax treatment.

However, the growing shortage of labour, especially in the new technology areas where the Government is seeking to encourage investment, means the issue is not going to go away for the Minister. Such options are a fact of life for the very new technology start-ups, the State wants to encourage, where pressures on resources are such that the salaries now commanded by the best in the field are impossible to meet in cash. Ignoring this reality runs the risk of persuading small, leading edge companies to set up elsewhere.