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Where Taxpayers and Advisers Meet

Propert portfolio split less than Market Value

BD73
Posts: 4
Joined: Wed Aug 06, 2008 4:09 pm

Propert portfolio split less than Market Value

Postby BD73 » Fri Mar 15, 2019 3:55 pm

A client has a half share in a property portfolio, roughly valued at £1m. The original purchase cost was c£900k, therefore unrealised gain at present £100k. He is selling his share to partner for £200k. As this is below market value of actual current value I assume there will be zero gain, and the £200k paid will increase the base cost for remaining partner.

I feel like I'm missing something really obvious, so apologies in advance if being dumb.

pawncob
Posts: 4248
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Propert portfolio split less than Market Value

Postby pawncob » Fri Mar 15, 2019 6:49 pm

Steve put it this way:


Market value...

... applies to any transaction not at arm's length.

Transactions between connected parties are automatically assumed not to be at arm's length so that market value applies.

A sale at undervalue to an unconnected party is not assumed to not be at arm's length, it might just be a bad bargain, but HMRC might still be able to argue that it wasn't an arm's length transaction.
With a pinch of salt take what I say, but don't exceed your RDA

AGoodman
Posts: 711
Joined: Fri May 16, 2014 3:47 pm

Re: Propert portfolio split less than Market Value

Postby AGoodman » Tue Mar 19, 2019 1:56 pm

...and under self assessment you would need a pretty good argument to explain how this transaction was at arms' length!

It would also be a £300k PET for IHT


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