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Where Taxpayers and Advisers Meet

An investment for mother & daughter at what tax liability?

Prishita
Posts:1
Joined:Wed Aug 06, 2008 3:12 pm

Postby Prishita » Fri Jul 30, 2004 6:06 am

My mum has been renting our home for 19 years and has a right to buy, but not the funds. I have recently returned from overseas and am now living with mum as I am unable to fund a mortgage on a new house.

We have dicussed buying her house. I would provide the funds via a loan not mortgage. But the house would be in mums name to buy at a discounted rate from the Housing Authority.

Mum would remain in the property I would hope to move overseas again in 3 years permanently. I hope to buy a property overseas at this time.

Could somebody please advise me of the best means of managing tax for both of us on this property as a long term investment for me and a life time benefit to mum?

Many thanks, Prishita

mike.hayes@firstcapi
Posts:28
Joined:Wed Aug 06, 2008 3:12 pm

Postby mike.hayes@firstcapi » Tue Aug 03, 2004 12:48 am

Dear Prishita,

Before you consider the tax, you need to look at your legal position. If mum were to die owning the property, who would it pass to? is your father still alive, do you have brothers & sisters, other relatives?

If you are lending mum the money, and you aren't charging a commercial rate of interest it is costing you money. If mum died would someone else benefit from your financial sacrifice?

You need to consider owning the property jointly, and you and your mum need to draw up wills to protect yourselves.

If you own a share of the property and mum lives in it, dependant on her income, then she is a 'dependant relative'. When the house is sold your mum's share is exempt from CGT as it is her main residence and your share is exempt due to dependant relative relief.

Despite owning a share of mum's house, you can still buy your own house, and this will be your main residence, and therefore exempt from CGT on sale.

Hope this helps.

Mike


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