Róisín Shortall (Dublin North West, Labour)
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Question 582: To ask the Minister for Finance the position, in relation to the incurring of stamp duty, of a young first-time buyer who proposes to travel for a year and rent out their home to cover mortgage repayments while they are away; the statutory reference that covers the rules on stamp duty in such a scenario; and if he will make a statement on the matter. [2822/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The reduced stamp duty rates for first-time buyers are granted on condition that, for a period of five years from the date the house is purchased, the house will be occupied as a principal place of residence and the first-time buyer does not receive rent for the letting of the house. The receipt of rent in respect of the letting of furnished accommodation in part of the house is allowed while the first-time buyer remains in occupation of the house.

In the circumstances outlined by the Deputy, a clawback of the stamp duty relief will arise as rent will be received for the letting of the entire house while the first time buyer is not in occupation of the house. Section 92B of the Stamp Duties Consolidation Act 1999 contains the statutory basis for the stamp duty relief for first-time buyers.

Billy Timmins (Wicklow, Fine Gael)
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Question 583: To ask the Minister for Finance the position in relation to a father who wishes to give a gift of a house on approximately one acre of land; the implications for capital gains tax and gift tax for father and son; if there are other taxes due on a gift of this size; and if he will make a statement on the matter. [2824/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am advised by the Revenue Commissioners that the proposed gift of the house and land, in the circumstances outlined, would be treated as a disposal by the father for capital gains tax purposes. In computing the gain the deemed sale price is the market value of the property at the date of the gift. For illustrative purposes a computation of the tax payable, using the figures and the limited information supplied by the Deputy, is attached. However, full or partial main residence relief may apply if the father occupied the property as his only or main residence during his period of ownership.

I am further advised by the Revenue Commissioners the question of gift tax arising when a parent makes a gift of a house to his son 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 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. This exemption ensures that what may be the family home for many people will not be the subject of gift/inheritance tax when it is the subject of a gift/inheritance.

Where dwelling house relief does not apply, the son in question can avail of the "Group threshold" exemptions. The relationship between the person who provided the gift or inheritance (i.e. the disponer) and the person who received the gift or inheritance (i.e. the beneficiary) determines the maximum tax-free threshold- known as the "Group threshold". The Group thresholds are based on the relationship of the beneficiary to the disponer and these thresholds are indexed annually by reference to the Consumer Price Index. 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 threshold is €496,824. Any other gifts/inheritances that might have been received by the child from the parents since 5 December 1991 will also be taken into account on each occasion when applying the threshold for the purposes of calculating the gift/inheritance tax.

In this case, where the value of the house is €400,000 approximately and where the son has received no previous gifts/inheritances from his parents, no gift tax will arise on the gift of the house by the father to his son. This is because either the dwelling house exemption will apply to the gift depending on the circumstances, or if this exemption does not apply, the value of the gift will, in any event, be below the tax-free threshold of €496,824 of the son from his parents.

Consanguinity relief provides that a stamp duty liability is reduced by 50% in the case of transfers between certain blood relatives, such as from a parent to a child. In this respect, a gift of a house valued at €400,000 attracts a stamp duty liability of €30,000 at the rate of 7.5%; which is reduced by 50% to €15,000. If the son in question has not previously purchased a house or has not received, on or after 22 June 2000, a gift of a house, first-time buyer's relief would apply and the stamp duty relief would apply at 6%. In this circumstance, after the application of consanguinity relief, the stamp duty liability would be €12,000.

Capital Gains Tax — 2007

The following computation illustrates the computation of capital gains tax payable on the gift of property from father to son, where the property was valued at €400,000 in 2007 and purchased during the 12 months ending on 5/4/1978 for €30,000. The incidental costs of purchasing and gifting the property are estimated at €1,000 and €5,000 respectively.

The computation is based on the legislation in place as at 31/1/2007.