capital gain sale of house

capital gain sale of house

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Clients mother transferred her main residence to client some 10 years ago but continued to live there.She died recently and client has put house up for sale.Will client be caught for capital gains tax on eventual sale?(house was his mothers residence for many years).Should an election be submitted to nominate this house to be his only residence before the house is sold?Any thoughts on this much appreciated.

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By User deleted
20th Apr 2012 13:37

Has he ever lived in the house during his ownership?

More particularly, if he has lived there, did he move in within the last 2 years?

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By LyneT
20th Apr 2012 15:40

If the client has not actually ever lived in the house, then he cannot simply "nominate" the house as his PPR.

As BKD has rightly pointed out he needs to have moved in within the last two years.

Otherwise the gain will be sales proceeds less MV at the date of the gift.

The only thing he could do if he has never lived there is to transfer it into joint names of himself and spouse prior to sale to utilise her AE or lower rates of tax.

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By StevieG
20th Apr 2012 16:12

Capital gain sale of house

Client has never lived there.If he moved in now say for 3 months would that help?

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By K81
20th Apr 2012 16:14

HMRC are looking at claims such as this as pota CG avoidance.

Your client would have to prove that this really was his main residence, bills, council tax etc & I would suggest that three months too short a period.

 

 

 

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By LyneT
20th Apr 2012 16:39

I would be really careful on this one.  What you are trying to do is to have a contrived PPR which as the previous poster said is an area which is ripe for investigation. 

There really is no set period for establishing the house as a PPR, despite some urban myths suggesting the timescale is 6 months.  It will turn on the facts and whether you can prove some sort of actual residency rather than the contrived one in which you are trying to create.

If you look at it from the inspectors point of view

1.  Client not living there when mother alive, despite owning both this and probably his own home.

2.  Mother dies then suddenly client decides he wants to establish residency.

3.  House is then sold, and fortunately for client, last three years are exempt because of the sudden urge to live in his dead mother's house.

If you try to advise the client to establish residency in these circumstances you could, if you are not careful, be part of a tax evasion investigation rather than a tax avoidance scheme.

Whilst you want to do your best for your client, do you want to be drawn into this if there is an investigation?

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