Kevin Humphreys (Dublin South East, Labour)
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Question 81: To ask the Minister for Finance the legal restrictions and tax implications that may apply to a property owner who may wish to dispose of their home by public raffle through sale of individual tickets; and if he will make a statement on the matter. [19205/11]

Michael Noonan (Limerick City, Fine Gael)
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The legal restrictions that might apply to a property owner disposing of her/his home by public raffle are a matter for the Minister for Justice and Equality, who states that it would not be appropriate to offer advice or comment; the parties should instead seek their own legal advice on the matter. However, the Minister informs me that, in the event of a raffle being regarded as a lottery, then the provisions of the Gaming and Lotteries Act 1956, as amended, may apply. Under that Act, a lottery may take place only if granted a licence. A licence may be granted only where the lottery is in aid of a charitable or philanthropic cause. I am advised by the Revenue Commissioners that, depending on the facts and circumstances involved, there are alternative possible tax charges on a person organizing a public raffle to dispose of his/her home.

First, a charge to capital gains tax may arise on any gain from disposing of a property by way of a lottery or raffle. The net proceeds or profits from the lottery would be regarded as the sale consideration for the property and this amount less the original cost of purchasing the property (and any allowable costs) is the amount on which capital gains tax would be charged. The rate of capital gains tax is currently 25 per cent.

If the property had been the principal private residence of the person making the disposal, then principal private residence relief may be available. Where the dwelling has always been the person's principal private residence, the entire gain is exempt from capital gains tax. Where the dwelling was not always the person's principal private residence, the amount of the gain that is exempt is be calculated by reference to the ratio of the period of occupancy as a principal private residence to the full period of ownership

Second, depending on the precise circumstances involved, the raffle may be viewed as a trading venture, in which case the profits would fall within the charge to income tax. This second treatment is more likely to apply if there are indications that the raffle generates profits in excess of what the dwelling might have been expected to sell for if sold on the open market in the usual way.

If the facts and circumstances were such as to indicate that the raffle is a trading venture, the property is treated as disposed of by the owner to the lottery and becomes trading stock of the lottery at a value equal to the market value of the residence at that time. The person disposing of the dwelling is chargeable to capital gains tax on any gain arising. If the dwelling is the person's principal private residence, he or she may be entitled to principal private residence relief as set out above. However any profits from the lottery, after expenses, above the market value of the house at the time it became trading stock, will be chargeable to income tax at the organiser's marginal income tax rate. There is an exemption from Income Tax in respect of the income element of the lottery profits, but only if the lottery has a licence under Part IV of the Gaming and Lotteries Act, 1956 (section 216 Taxes Consolidation Act 1997).