CGT on house occupied by parents

CGT on house occupied by parents

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House sold in June 2001 following mothers death in July 1999. Was occupied by her but gifted to a client and his brother in November 1993.

As she lived there rent free, there would have been a "reservation of benefit" and house should have formed part of estate? But is cost on disposal based on 1993 value or 1999 value.If 1993 value can any IHT paid be deducted (but Nil in this case)?
Kevin Salter

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By AnonymousUser
26th Mar 2002 11:15

Can IHT paid be deducted from CGT?

Kevin,

There is just one more question which needs to be answered. You asked "If 1993 value can any IHT paid be deducted (but Nil in this case)?".

The answer is not clear. However, If the gains were previously heldover under Section 165 and/or Section 260 TCGA 1992 then Section 165 (10) and Section 260 (7) allows any Inheritance Tax paid to be deducted. In your case the two sections do not apply and so I don't think you can deduct any IHT as far as your case is concerned.

For completeness, there is no direct relief against Inheritance Tax for CGT paid but if any CGT is payable for whatever reasons then this is an allowable deduction to arrive at chargeable estate on death. Generally, there is no CGT on death.

Hope this provides the complete answer to your question.

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By User deleted
26th Mar 2002 09:55

What were the terms of the gift?
There may be an escape route from the correct analysis given by Jay.

If the term of the gift was that it was conditional on the deceased being entitled to live in the house[rather than her entitlement to occupation being informal], then it is arguable that what was created was an implied trust , so that relief from CGT would be available under TCGA s.225.

It may be helpful that this right of occupation is treated under IHTA s43(4) as a settlement for IHT purposes, although for IHT the GWR rules would bite anyhow.

The interesting question would be what would have happened if the gift had beeen made in identical circumstances in 1985, when the GWR rules did not exist, but the provisions of
s. 43(4) did.

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By AnonymousUser
25th Mar 2002 17:33

I have answered this question indirectly on 08/03/2002

Kevin,

I have answered this question (comment #5) earlier this month and the link is here:

Can a Gift with Reservation IHT be paid by instalments

If you have a supplementary question please post it here again.

Regards,

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