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CGT conundrum

inheritancce mixed up with CGT

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I have a friend who bought his Mum's house with a mortgage 12 years ago and let her live in it rent free until her death this year.  He paid the mortgage himself.   Didn't form part of her small estate (that was her only real asset pre-sale) when she died so he now has to take account of CGT on the sale that has just gone through.  The problem is that via a verbal agreement he is giving away £50k of the sale price to each of his 2 brothers - there was no will.  Once the mortgage remaining has been paid off he will be left with less than his brothers, having paid for the mortgage all these years.   Is HMRC likely to accept that his proceeds can be reduced by £100k if the brothers agree to advise HMRC that they each had a gain of £50k with no base cost?

I know, what a silly man, if only he'd asked for advice before buying it in the first place...

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17th Apr 2019 13:55

Clearly the CGT is all chargeable on him - why should hmrc agree to some imaginary re-allocation of the gain?

He's made a very generous verbal agreement with his brothers: now's the time to sit down with them, point out his difficulty and reduce their gifts accordingly.

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to Kevkava
17th Apr 2019 14:25

Quite - the guy clearly temporarily took leave of his senses and he needs to make that clear to his brothers.

Given that he bought the house and paid the mortgage, I'm struggling to understand the reason for the gifts.

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17th Apr 2019 14:18

So, the property is actually 'his' as its chargable for CGT.. So why is he having to pay any of it to his brothers?

This sounds very confused.

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By jcace
to andyjdicker
17th Apr 2019 14:27

I would guess that the amount he paid his mum was considerably less than its market value at the time, but perhaps the OP can elaborate.

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17th Apr 2019 15:23

Yes, he paid less than the value, but even taking that into account they are ending up far better off than him, and has been paying a mortgage all this time. Why do people enter into these things without advice, his only way not to suffer a very unfair split is to now have a fraught conversation with the brothers.

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to WillowTree
17th Apr 2019 15:41

Isn't the problem partly that Mum spent the money – else it would still be there to pay the "gifts"?

Remember that his base cost is the value when he bought it – not what he paid. I'm not convinced by the rest of your tax analysis either, but to be fair you have not said much (and what you have said is ambiguous – I had for example read the situation as buying a house for his mother, not buying the house she already owned) – so I may be wrong.

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to Tax Dragon
17th Apr 2019 15:55

Tax Dragon wrote:

Isn't the problem partly that Mum spent the money – else it would still be there to pay the "gifts"?


Happen she left it to the other brothers.
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By SXGuy
18th Apr 2019 08:05

It's his choice to give money to his brothers, it doesn't change the fact HE had a gain, not them.

I'm just about to sell a property and make a nice gain, I better go find someone I feel like paying to reduce my liability.... Oh wait.

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18th Apr 2019 17:55

Was the requirement to pay £50k to each of the brothers part of the agreement made when the house was acquired at an undervalue? I.e., you can buy it at £150K under MV as long as you eventually ensure your brothers do not lose out.

If so, is it possible that this was additional consideration for the house which was an asset of the mothers that should have formed part of her estate which is now being distributed?

If the agreement was made post acquisition, the above cannot be the case.

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to darren.austin
18th Apr 2019 23:36

I think I get where you are coming from vis-à-vis the proceeds not received. But if you think about the basic gift with reservation rule, it's not the non-existent proceeds that come into the donor's estate - it's the asset that was given away but is still enjoyed. And it doesn't matter whether or not there is any agreement with the recipient as to what he or she does with the money they didn't pay.

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