Gifting a rental property can be a costly business
The situation will be slightly different on your new home. Once you move in, obviously, it becomes your principal private residence and no tax will be liable on the period of ownership for which it has this status. However, you will be liable for tax for that part of your ownership during which it was a holiday home.
If you bought the property in 2007, move in next year and sell it in turn in, say, 2020, you will have owned the house for 13 years, for seven of which it will have been your family home, or principal private residence.
Thus, seven-thirteenths of any eventual profit on the sale of the property will be exempt from capital gains; you will be liable to the tax on six-thirteenths of any eventual gain. Of course, in today’s circumsta-nces, there might be precious little gain to worry about.
Multiplier for gains, not losses
Can the multiplier be used to enhance a loss in the sale of shares – say shares bought in 1980 and sold today? Is it the actual monetary loss that can be carried forward or the multiplier enhanced loss? Mr MS, Dublin
The multiplier is a feature that no longer exists, having been abandoned at the end of 2004 by then minister for finance Charlie McCreevy. Essentially it adjusted the original purchase price to allow for inflation for the purposes of assessing capital gains tax.
The multiplier was set by Revenue each year – back then tax years ran from April 1st to March 31st and multipliers were allocated to tax years, not calendar ones. Thus, if you bought shares in March 1980 at, say, 72 pence and were looking to sell them today, you would multiply the 72p purchase price by a multiplier of 3.742. That would increase the purchase price to £2.69.
Of course, to assess the impact on capital gains tax today, you would have to convert that to euros, dividing 2.69 by 0.787564 to give €3.42.
This however is relevant to you only if you have a capital gain on the sale of the shares. So, if you are selling today at a price in excess of €3.42 a share, it will help defray any liability to capital gains, but it cannot be used to enhance a loss. When it comes to losses, only the actual monetary loss is factored into the equation.
Converting your original 72p purchase price to euros (without the multiplier effect) gives you a euro purchase price of 91 cents. If you sell below this, the multiplier is irrelevant.
If you sell between 91 cents and €3.42 a share, the multiplier can be used to offset any nominal gain but no further. If you sell below 91 cents, you will be nursing a capital loss and this can be offset against gains in subsequent years.
This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to firstname.lastname@example.org. No personal correspondence will be entered into.