John Deasy (Waterford, Fine Gael)
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Question 139: To ask the Tánaiste and Minister for Finance if his attention has been drawn to the difficulties that have arisen as a result of section 116 of the Finance Act 2007 which will have huge tax implications for co-habitating couples in long term relationships where the house owning partner wishes to transfer their property into joint names; if it was his intention that people who may not have great financial resources may now on the death of the house owning partner be levied with high capital acquisition tax on the family home; the plans he has to revisit this section of the Finance Act 2007; if he will introduce an amendment to ensure that partners and children in this situation are protected; and if he will make a statement on the matter. [25758/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Section 116 of the Finance Act 2007 amends section 86 of the Capital Acquisitions Tax Consolidation Act 2003 by providing that (with some exceptions) relief will not be available where a donee lives in the principal private residence of the disponer and subsequently that residence is gifted by the disponer to the donee. This is intended to prevent a son or daughter being gifted a house by his or her parent free of capital acquisitions tax where that son or daughter was, until shortly before the time of the gift, still living in the parental home.

The section also requires that the gifted house must be owned by the disponer during the 3-year period even if it, or any house that it replaced, was not his or her principal private residence. This is to counter a claim for relief where an individual sells his or her principal private residence to his or her parent for full value and the house is then gifted back to that individual by his or her parent. It also counters the use of family trusts in gifting houses to children.

It will be noted that the amendments in the Finance Act 2007 apply only to gifts of houses. No changes have been made to the conditions applying to houses acquired by way of inheritance. The position of partners and children in the situation outlined in the Deputy's question has not, therefore, been affected in relation to houses acquired by way of inheritance.