Capital Gains from Disposal of Rental Property

Capital Gains from Disposal of Rental Property

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Property was orginally gifted to the couple and all Inheritance Tax obligations has been met. After a few years of letting the property, Beloved Wife passed away. Property has been let for a further few years until last year.

For CGT purposes :- Would one account for acquisition cost as the market value at the time of gift? 2. Has CGT Allowance of Beloved Wife completely loss.

Quick response will be greatly appreciated. Have a nice day.

Noran

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By Steve Knowles
04th Apr 2011 14:54

CGT costs

It seems that the property was gifted jointly to both spouses, and on wife's death the whole property passed to husband.

At the time of the original gift, each one acquired a half share at market value at the date of gift (or at Probate Value if inherited). When wife died her half share was passed to husband at the then market value on date of wife's death.

Thus, he now owns the whole property, of which half has a cost for CGT purposes based on the original value at date of gift, and half has a CGT cost based on value at date of wife's death. Wife's CGT allowance is now irrelevant.

Was the property ever occupied by husband as home? This would have a significant effect on the final CGT liability.

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By justsotax
04th Apr 2011 15:06

..probate value...

I assume by gift you mean inherited....in which case the property would have been passed to the client at its market value

(proabe value) which would be the clients base cost for cgt.  On death of the wife the base cost of the 50% the husband then inherits

would be the market value/probate value at the date of death.  In doing so, any 'gain' that has accrued whilst the wife owned the

asset will roll up into the new base cost for you. (well thats the basics anyway)

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By Noran Jaffy
04th Apr 2011 16:46

Thank you very much for the replies

On another note, if the husband has spent only 90 days in UK throught 2010-11, would CGT still be payable. Can I claim non residency status?

Before 2010-11, he spent on average 5months in UK. IN 2010-11, he has no other sources of income except from the disposal of the property.

Many Thanks

Noran

 

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By Steve Knowles
06th Apr 2011 12:24

Residence and CGT

This is a whole new can of worms!

The question of residence is never as straightforward as simply counting the days in the UK - is the husband normally resident abroad? How long ago did he leave the UK? How often does he return? How long does he plan to stay abroad? If he is planning to return in the near future, what is the reason for going abroad? You need to look at the overall pattern before deciding whether someone is non-resident.

It may be possible to avoid CGT liability if there is no doubt about his non-resident status, but only if he is non-resident for five full tax years - if he becomes resident again before then, the gain falls into charge.

 

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