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Capital Gains Tax Base Cost

Mother died Jan 04. Value of the house for IHT purposes was £720,000.

Mother had previously gifted the property to her son and his wife in August 1997 and registered title was transferred by HM Land Registry on 13/8/97. Mother continued to occupy the house as her residence so effectively nothing changed and the gift has been ignored by the solicitors for IHT purposes, re gifts with reservation etc.

The property was valued at £240,000 in August 1997 and the property has now been sold for considerably more than £720,000. Therefore, the correct CGT base cost of the house is of great importance.

Initial thoughts are that the capital gains base cost for the son and his wife is £240,000 being the value at transfer/gift in August 1997. However,
I am struggling with the interaction of TCGA s.225 and TCGA 1992 s73(1)(b) etc and whether in fact that the mother has created a life interest settlement and the CGT base cost should actually be £720,000, being when the asset actually passed to the son?

It just seems that if the CGT base cost is £240,000 the Revenue get their cake and eat it. i.e. they can ignore the gift/transfer re IHT but then decide not to ignore it for CGT base cost purposes!!

The property had a protected tenant in it, at both the date of transfer and date of death. I assume this makes no difference to the CGT base cost as it merely affected the value of the property. The tenant vacated the property shortly after the mother died.

Many thanks and apologies for the lenghty summary.

Jason Sharp


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16th Nov 2004 11:48

CGT Base Cost where there was a life interest
I am dealing with a similar situation except that there was a life interest not a gwr.

Mother died Mar 02 leaving property to daughter subject to life interest of grandmother. Value was £100,000 taking into account the life interest.

Grandmother died Jan 04, and at this date the value was £150,000 with vacant possession.

If daughter now disposes of the property, what is the base cost for CGT purposes? Is it the Mar 02 value or the Jan 04 value?

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