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I have a question on CGT .  

CGT

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A client & his wife had purchased his mother's house back in 2007 (at the cost of the outstanding mortgage of £71K).  At that point the MV would have been £90K

His mother lived on in the house until her death in 2018.  It was sold for £167K.  The chargeable gain after allowing for aquisition costs and disposal costs is a total of £83K.  (This has been calculated using the actual purchase cost of £71K).  No reliefs have been allowed as the clients never lived in the property or rented it out.

Would there be any way to value the acquisition at £90K and have the difference of £19K treated as a PET for IHT?

 

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By trust.pem
29th Nov 2018 17:10

Your starting point for the base cost should be the market value at the date of acquisition, as a connected party transaction. Bear in mind that determining the market value could be tricky if, for example, your client's mother retained a right to occupy the property when it was gifted.

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By Tax Dragon
29th Nov 2018 17:25

What would your view be of the suggestion that the apparent £19,000 discount was (in essence) in lieu of rent?

It's just a guess of course. As ever, facts are lacking in what we have been told.

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By trust.pem
29th Nov 2018 21:49

I wouldn't go there without any paperwork in support. I wonder whether any rent has been declared for income tax purposes....

Forget about the PET. I suspect there is a GWROB so chances are the property was still in mother's estate when she passed away this year.

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By MaryTK2
30th Nov 2018 09:51

Yes, it could be seen potentially as a discount in lieu of rent
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By MaryTK2
30th Nov 2018 09:49

Thank you . Yes apparently the mother was finding it difficult to pay the mortgage and it was agreed she would continue to live there and also rent free.

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By bettybobbymeggie
29th Nov 2018 19:31

If only your client had taken advice back in 2007.

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