Hi observer35. It still isn’t clear to me where the tax advantage is selling the asset at an inflated price. How exactly is the asset “washed” of tax liability after five years as mentioned in your proves posts?
In simplified terms, there are three main steps here:
Transfer house into an offshore trust.
(would have been done a long time ago, or at least pre PPR, and at the lowest price, to save stamp duty).
(note that it hard to undo / reverse this transaction, so it is only recommended if the owner will hold the house until death).
Later on, pass ownership of the trust to the beneficiaries at same price (no tax implications here).
(there is more structuring that can “shield” the beneficiaries from their ownership of this trust, if they need it).
After +5 years, beneficiaries buy the house out of the trust, and back into their own personal ownership.
(you want to do this one at the highest price possible price so as to minimize future CGT when they eventually sell it).
(there are several techniques for the trust getting paid by the beneficiaries for this transaction without “cash” changing hands).
(note that it is important for items not mentioned in 2. regarding “shielding” that it is at least 5 years).
And viola - the beneficiaries end up avoiding inheritance tax AND even future CGT on any price over the inflated price.
A favorite structure of “legal types” in Ireland for protecting the “big house” for the next generation.
(also featured in Gail Killilea’s buy-out of Walford from trust Sean and herself had held it in - and also done at “full” price).
(although, not as mad a 5 Temple Gardens price, which was just bringing too much attention to it.).
IRISH INEPENDENT: Surge in number of ‘rich parents’ using loophole to avoid tax.
“Rank-in-file” rich, need to get some proper “legal” advice about inheritance tax management on their properties.
You don’t need to use any “loopholes” etc.
The legal-types have this issue nailed in Dublin:
The Albany, Albany Avenue, Monkstown, Co Dublin.
I still don’t know how this works. Lets say this house house is probably really worth €4m. Who ever pays €6.5m for it in this market, will it not be seen that they gave the vendors a gift of €2.5m and be subject to gift tax?
They are buying it off themselves to take it out of a non domiciled trust structure (which they own) and back into their own direct hands. No physical cash changed hands (although the stamp duty is a real cash cost). There is no tax incurred in the non-domiciled trust structure.
The key is to buy it back at the highest base cost possible, so that if you eventually sell for say 6m in ten years time to a genuine 3rd party, you incur no real Irish CGT.
We had another house in Ailesbury Road appear on the register with the same technique (and regularly appears in SF “valuation” reports to buyers etc.)
Much more powerful technique than the “loopholes”, and particularly if you can set up and administer the trust structures yourself. Not only can you bypass inheritance tax, but you can also bypass future CGT as well.
There is potentially something to this but, as usual and despite a word count in four figures, I cannot figure out what you mean.
Another legal eagle sells (or ‘sells’?)
19 TEMPLE RD
Date of Sale: 18/05/2016
Not Full Market Price: No
VAT Exclusive: No
Description of Property: Second-Hand Dwelling house /Apartment
Nearly €2m more than High Cross which is actually on the market
And on a south facing aspect.
I caught an EA using another “restructuring” transaction from Ailesbury Road in their “valuation” recently (wasn’t a legal family however doing it).
I also posted on another “legal” type however whose holding structure will probably also see another such “ramped” transaction c five years after his passing and the asset returns (legally) home.
1 Temple Gardens is on the register for . . . … . . . €5.85m
Nice house but am speechless at that price. It almost makes 5 Albany road nearly look like value!
Temple Gardens seems to be ground zero for these tax transactions which get exposed when anyone tries to actually sell a house.
Madeleine Lyons in the IT presented these prices as if they are real because two houses were actually on the market:
number 17, Northcote, which went on the market last year seeking €4.5 million…Following a price drop to €3.95 million it’s understood the rambling 340sq m (3,660sq ft) redbrick closed in recent weeks for a figure close to this sum.
Fortunately for the buyer, the actual price was €3.5 million which is €350,000 short of the reduced asking price but that’s “close to asking” when you’re in this rarified atmosphere
The house next door, No. 16 Kilfenora, had an asking price of 2.95 Million and has recently gone sale agreed. Hard to stomach the thought that anyone could steal one of these precious jewels for less than 3 Million.