Your Questions Answered – The Dwelling House Exemption

Question:   My daughter bought a house in Dublin in 2012 and she has since lived in this since then.  She took out a mortgage to finance the purchase of the house and the mortgage is in her name.  She has since married.  My wife and I bought a house in Dublin in 2014 as an investment and it has been rented since then.  We have now decided to pass this house on to our daughter and we want to try and avail of the dwelling house exemption relief where she lives in this for three years and retains the property for a further 6 years.

Is it possible for her to transfer her own house to her husband, fulfilling the condition of our daughter having no house in her name when we transfer our house to her?  Can her husband take out a mortgage in his own name and be the sole owner of their house?

Answer:     Yes, your daughter should be able to avail of the dwelling house exemption on receipt of the interest in the property as long as she satisfies the following conditions.

First she must live in your investment property for at least three consecutive years before the transfer, second at the date of receipt of the legal title in the property she must not have a beneficial interest in any other dwelling house and third she must live in that property for a further 6 years after receiving it.

Legal advice should be sought in relation to the transfer of your daughter’s property into your son in laws name and you should also speak with a mortgage adviser about the possibility of your son in law taking over the mortgage.

From a tax perspective the transfer of an asset between your daughter and her husband should not create a CGT liability in your daughter’s name and your son in laws should be able to receive any benefit from the wife free from CAT and stamp duty under the inter-spousal exemptions.

Assuming the market value of the investment property has increased from the time of purchase in 2014 and when you anticipate you will transfer the property to your daughter, this may create   an exposure to CGT in your and your wife’s names.  Revenue will impose market value on the transaction as it is a transaction between connected parties.  In addition, your daughter will have to pay stamp duty of 1percent on the market value of the property.

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