Crowe v Appleby and subsequent disposal of undivided share

Crowe v Appleby and subsequent disposal of...

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Land is held in trust for X and Y. X becomes entitled before Y. Because the land is held in undivided shares, there is no capital gain assessable on the trustees when X becomes entitled. (Crowe v Appleby) - the trustees' capital gain is triggered on X's undivided share only when Y becomes entitled. The reason for this is that, in the case of an undivided share in land, X cannot direct the trustees how to deal with his undivided share in that land - he has not become absolutely entitled as against the trustees.

 X gives away his undivided share. (Not to spouse.) What are the capital gains tax consequences? What X has given away is not his share in the land - it is some kind of chose in action (I think!). Maybe his right to a share of the proceeds should the trustees sell the land. The CGT would be based on the value of that right at the time he acquired it and the value at the time he gives it away.

I had difficulty at first in seeing how a gain could arise on X before it arises on the trustees, when we do not know what X's base cost in the land is. Hwoever, I think X is giving away a different asset. The trustees' gain arises on the disposal of the land (either to a third party or when Y finally becoems absolutely entitled, at which point X and Y can direct the trustees how to deal with their shares in the land.) X is givng away not his interest in the land but a chose in action.

What am I missing? Am i making it too complicated?

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By MJShone
13th Jul 2015 12:26

s76 TCGA 1992

It could be that when X gives away his undivided share, that is exepmt under s76?

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By blok
13th Jul 2015 14:10

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I think I agree - s71 not in point until the later date and s76 deems a transfer of the interest in the trust to not be a chargeable gain unless consideration passed between the transferor and transferee

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