CGT

[regiment]

In 1992 on the death of their father his two adult children used their inheritance to join their mother (the surviving widow) in the purchase of the family home which had hitherto been rented. All three contributed an equal share of the cost and were shown as joint tenants on the transfer deed.

Both children had their own homes and were not resident in the family home at the time of its purchase, or since its purchase (With hindsight and capital gains in mind this was probably not the best course of action for the children)

With the passage of the years the mother now wishes to move into a retirement flat.

The children are prepared to purchase the mothers third at market value and use the house as a rental investment. The mother would then use her proceeds to purchase the retirement flat.

The cost of the house in 1992 was £450,000 to which all 3 each contributed one third. Its present market value is in the region £525,000.

It is assumed that purchase of the mothers share at market value (say £175,000) would attract stamp duty even though the children already own two thirds of the house?

If the children eventually sold the house, then capital gains would obviously become due, and possibly there are other latent tax implications.

Is there a better way for this family to deal with the situation? Any suggestions would be gratefully received

[Peter D]

Are your numbers correct. A rise of only £75K since 1992 seems very low indeed. Regards Peter

[regiment]

Thanks for your comment Peter. That was the highest of 3 estate agent's estimates. In the Northwest of the UK values have risen less than elsewhere.

[Peter D]

Are you sure you paid £450K in 1992. Those numbers are way off or the house has dilapidated big time. Regards Peter

[mullet]

I'm not convinced by the numbers either. The Halifax index says: "An average house, in the North West region valued at £450000 in 1992 Q1 would be worth £975230 in 2011 Q3. A change of 116.7 percent."

Or the other way round: "An average house, in the North West region valued at £525000 in 2011 Q3 would be worth £242250 in 1992 Q1. A change of -53.9 percent."

Both children had their own homes and were not resident in the family home at the time of its purchase, or since its purchase (With hindsight and capital gains in mind this was probably not the best course of action for the children)

I hope I'm not reading too much into that comment, but a response - even if the children had moved into the property for a time in the belief that such occupation would have secured a measure of private residence relief, they are unlikely to have succeeded. Temporary occupation does not amount to "residence".

[regiment]

Irrespective of what the Halifax index states, this property (part of the large David Wilson Homes development at Timperley Green Cheshire) was sold as a new build in 2000 for £350,000: sold at £450,000 in late 1992: and valued on the Right Move web site in January 2012 at £565,000. Now that that the value is settled is there any chance of a response to the original question.

[mullet]

sold as a new build in 2000 for £350,000: sold at £450,000 in late 1992: and valued on the Right Move web site in January 2012 at £565,000.

Well those dates make no sense at all.

Now that that the value is settled is there any chance of a response to the original question.

Calm down.

valued on the Right Move web site in January 2012 at £565,000

That is not a reliable way to value an asset for CGT purposes.

Is there a better way for this family to deal with the situation

It is difficult to give a reasonable answer on the basis of such minimal information. So much depends on each person's wealth, age and personal circumstances ... among other factors. I think you need to seek face to face advice. You could easily get the wrong answer here. And I am still unhappy about the valuations ... is the rise in value really only 25% in 20 years?