I am advised by the Revenue Commissioners that the tax implications, where a parent of a first-time buyer is involved in the purchase of a home for the first-time buyer, will depend on the nature of the parent's involvement in the purchase. I will deal with the different taxes in turn.
Stamp Duty
Where the parent makes a cash gift to a child of all or part of the purchase monies to enable the child to purchase a house, there is no stamp duty liability on this gift. The stamp duty relief for first-time buyers would apply where the monies gifted are used by the child in purchasing a house in his own name provided the child had not previously purchased or received a gift of another house.
Where a house is purchased by a parent and subsequently gifted to a child who is a first-time buyer, a liability to stamp duty would arise in the first place on the purchase of the house by the parent. The subsequent gift of the house by the parent to the child would qualify for first-time buyer relief where the child had not previously purchased or received a gift of another house.
Where a house is purchased in the joint names of a parent and a child, the first-time buyer relief is only available where each of the purchasers is a first-time buyer. Therefore, the relief would not be available where the parent had previously purchased another house.
Capital Acquisitions Tax (Gift and Inheritance Tax)
Whether gift tax arises when a parent purchases a home or a substantial portion of the home for a child depends on the circumstances. The Finance Act 2000 introduced a package of measures specifically designed to reduce the impact of gift/inheritance tax for certain dwelling houses. The purpose of this exemption was to benefit individuals who had been living in a house for a period prior to taking the benefit, either by way of gift or inheritance. The main conditions attaching to the exemption are that the beneficiary of the dwelling house must have resided in the house for a minimum of 3 years prior to the gift/inheritance and must not have an interest in any other dwelling house. Also, the recipient or recipients must continue to occupy that dwelling house as his/her only or main residence for a period of 6 years commencing on the date of the gift/inheritance. Therefore, a parent can purchase a home or portion of a home in the parent's own name and subsequently transfer that home or their interest in that home to the child and, if the child, at the date of the transfer of the home to them, satisfies the above conditions, the transfer of the home to the child is exempt from Capital Acquisitions Tax.
If this exemption does not apply, depending on the circumstances of the case, then the normal Capital Acquisitions Tax computational rules set out below will apply to the gift of the dwelling house or alternatively to the gift of any purchase monies gifted to the child to enable the child to purchase the property directly in the child's own name in the first instance.
For the purpose of both Gift and Inheritance Tax, the relationship between the person who provides the gift or inheritance (i.e. the disponer) and the person who receives the gift or inheritance (i.e. the beneficiary), determines the maximum tax-free threshold- known as the "Group threshold".
The indexed Group threshold applying to a gift or inheritance received by a child from their parents is the Group A threshold and for 2007 this Group A threshold is €496,824.
Any other gifts/inheritances that might have been received by the beneficiary from within the same Group A threshold (i.e. from parents) since 5 December 1991 will also be taken into account when applying the threshold for the purposes of calculating the gift/inheritance tax. If the total value of all gifts and inheritances received by the beneficiary since this date from within this Group is above the threshold figure of €496,824, then a 20% rate of gift/inheritance tax will apply on the difference.
Capital gains tax (CGT)
CGT is chargeable on a transfer of ownership in an asset whether by way of sale, gift or otherwise. Cash is not an asset for CGT purposes. The subsequent disposal by a parent of a house or an interest in a house, which was purchased for a child, whether by way of a transfer to that child or a sale to a third party, is a chargeable event for CGT purposes. To the extent that the gain is attributable to the parent, main residence relief wouldn't apply. Where the house is wholly or partially owned by the child, any gain attributable to the child on a sale would be exempt from CGT provided he/she occupied the house as an only or main residence throughout the period of ownership or occupied it to within 12 months of sale.