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Sale of jointly owned property

Siblings and one other own property jointly. One sibling buys out the co owners.

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Brother, sister and an unconnected party jointly own a residential property 1/3 each.

The property is lived in by the sister and she has now bought out the other two so that she owns the whole property.

She paid each of the other parties £90,000.  The property at that point was in fact valued at £275,000.

In so far as the unconnected party is concerned, her proceeds for CGT purposes would seem simply to be the £90,000 she actually received.

For the brother however, as he is connected, would one value his proceeds as being 1/3 of the market value, less say 10% for the fact that there was a joint ownership before the sale - therefore £275,000 x 1/3 = £91,667 x 90% = £82,500.

This is actually less than the £90,000 his sister paid him for the 1/3 share so would one use the actual proceeds?

Thank you for any thoughts

Replies (4)

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By K81
07th Nov 2018 09:06

why would the brothers sale price for CG not be £90,000?

Thanks (1)
Hallerud at Easter
07th Nov 2018 09:53

I would argue that as the third party accepted £90k for a third interest in the property that transaction established the market value of a third interest as £90k.

Surely a market transaction is the best evidence.

Thanks (1)
Replying to DJKL:
By stephenpotter
07th Nov 2018 11:05

Apologies if I wasn't clear but the sister paid the brother and the third party both a sum of £90,000 each.

It was the transaction between the sister and brother I was concerned with. As they are connected, I would have normally used market value (discounted for the joint ownership).

Presumably in this case, as the sister was prepared to pay above that sum then the £90,000 would be substituted for the lower discounted market value?

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Replying to stephenpotter:
By johngroganjga
07th Nov 2018 11:15

I agree with K81 and DJKL that you are overthinking, and £90,000 is plainly the arm's length value at the relevant time. It must already reflect all relevant discounts (or else the sister would not have paid that much to the third party), so to seek to deduct them again is double counting.

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