# CGT when couple bought out other share

50-50 or 75-25?

• ### Loan to a friend for one year

Miss A and sister bought flat 50-50.
Some years later, Miss A married Mr B and they bought sister's share, sharing the cost 50-50.
They became 50-50 owners, as evidenced by deeds and share of (later) rental income.
At this point, has Miss (now Mrs) A paid for 75% of the flat but only owns 50% of it? and has Mr B acquired 50% but only paying 25% ?

Then Mr and Mrs move away, buy new main home and rent flat out for a few years.
Then they sell it.

Some PRR of course, but has Mrs A made a loss because she paid more in her two tranches of acquisition than is her 50% share of disposal?

And has Mr B made a large gain because he's got 50% of disposal when he only ever paid 25% of acquisition?

Very many thanks for any insights. If I have missed something obvious I apologise in advance and plead the middle of January excuse.

### Replies (17)

By Paul Crowley
14th Jan 2022 21:03

If Mrs A agreed ownership is 50-50 then she made a gift of 25% to Mr B, as evidenced by the deeds or she gave a gift of money to Mr B so he could buy the entire former sister's share of 50%

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By jonharris999
14th Jan 2022 21:10

Brilliant Paul thanks so much.

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By The Dullard
14th Jan 2022 21:13

I'd suggest that Paul's second proposition is the correct one. Mrs B provided Mr B with half of the funds needed to purchase the 50% share that he then acquired.

That means that Mr B will have a smaller gain than Mrs B, on the assumption that the house appreciated between the original acquisiton by Miss A and her sister, and the acquisition of the sister's half by Mr B.

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By jonharris999
14th Jan 2022 21:29

Spot on.

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By Paul Crowley
14th Jan 2022 22:17

Agree
I would opt for the latter in absence of anything to the contrary if only because the calculations are easier fror a client to follow

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By TheNovice
14th Jan 2022 21:11

Removed

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By More unearned luck
15th Jan 2022 12:29

Of course, the sum paid by Miss A/Mrs B for her part of the share bought from the sister is not to be taken into account in the computation. This will also apply to Mr B's share if the order of events is as described by you.

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By The Dullard
15th Jan 2022 13:20

Before the purchase from the sister, Mrs B owned 50% of the property. After the purchase from the sister, Mrs B still owned 50% of the property. How large a share of what was bought from the sister did Mrs B acquire?

Sargaison v Roberts may or may not assist you.

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By More unearned luck
15th Jan 2022 15:25

Mrs B acquired a half interest in the sister's share on exchange of contracts (at least as regards CGT) to add to her existing interest. The subsequent conveyance to Mr & Mrs B either as joint tenants or as 50:50 tenants in common amounts to a gift of a 25% interest to Mr B. Even if contract and conveyance were on the same day, there would have been at least a scintilla of time when Mrs B had a beneficial interest in 75% of the property.

I note that in Sargaison the scintilla was ignored, but the facts are different: that case involved splitting, the OP's case the merging of interests.

Not that this is at all relevant, as I said, the purchase price is to be ignored.

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By gillybean04
16th Jan 2022 11:20

I think it depends on what was agreed.

Paying money towards an interest being acquired in the property does not mean you acquire the interest. Think of parents contributing for their adult children. They don't gain an interest unless the intent was for them to gain an interest.

Is the property now held 5050 because there was never any intent for wife to gain further interest in the property (merely to supply the funds to her husband to enable him to do so)? Or because wife acquired further interest and then separately disposed of it?

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By More unearned luck
16th Jan 2022 17:47

Like I was, you are guessing at the facts. Only the OP can put us out of our misery.

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By RetiredTax
15th Jan 2022 12:33

Do you need to consider that the purchase from the sister is a connected party transaction - and so maybe the actual cost of this part is not necessarily the figure to be used in the calculations!

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By The Dullard
15th Jan 2022 13:23

Yes, market value applies if full market value wasn't paid. Both Mr B and Mrs B are connected with Mrs B's sister.

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By Paul Crowley
16th Jan 2022 17:57

Which results in less tax being due from Mr B
Each comment improves OP's position

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By The Dullard
16th Jan 2022 18:32

We don't know what the sister was paid relative to market value. It could have been market value, it could have been less, or it could have been more.

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By Tax Dragon
16th Jan 2022 19:44

Paul Crowley wrote:

Each comment improves OP's position

Obviously not. But would you have a problem with that if it was so?

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By jonharris999
16th Jan 2022 21:36

The sister was paid MV for her share; and the first of Gilly's alternatives is the right one, ie never any intent to do anything other than share 50-50 between husband and wife after the buyout.

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