CGT

Market value required?

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Met with client today. His mum passed away and probate granted and dated Oct 2014. This is first time I have dealt with this on my own.

Summary of the estate shows he was given 20% of the value of his mums house. Probate value of the house was £250k. His share therefore £50k

The Estate summary then confirms he then transferred his 20% share to his sister for £50k. This shows in his bank statment dated July 2016 which is when the solicitors confirmed purchase of his share by his sister per a dated letter.

Am I right in thinking that for CGT my 'proceeds' amount is not the £50k he actually received but 20% of the market value of the property at July 2016. So this might be say £300k. [I will of course get a proper market valuation if my reasoning is correct]

20% of this= £60k.

Cost at probate = base cost= £50k

Capital gain £10k. Within the AE. No tax to pay.

Thanks in advance.

 

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By bajones
26th May 2017 12:28

Correct, they are connected persons for CGT purposes so it's deemed to be at market value under S18 TCGA 1992.

Although I wouldn't have though market value is as simple as 1/5 of the total, since it could be that if the sister was living there and he was not, his interest has less of a value.

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By MBK
26th May 2017 16:54

Agree. The market value of a fractional joint interest will always be less than the pro rata share of the whole. The valuer needs to be instructed to value just the fractional share - not the whole.

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