CGT on 2nd home received as a gift

[Stewart]

1 Parents owned a 2nd home jointly for 32 yrs.
2 Father died 2 yrs ago and willed property to Mother. Mother lives elsewhere.
3 Mother wants to gift 2nd property to me now.
4 If I sell immediately is there CGT to pay by anyone?
5 Their main residence gifted to another about 12 yrs ago.
6 I understand the 7 yr rule on gifting.
7 I do not understand the CGT on inherited property!
Help please!
Thanks

[Nigel Lord]

Stewart

If your parents were joint tenants then the property would have by-passed your father's will and been transferred directly to your mother.

Your mother will be treated as having acquired half of the proerty at the date it was originally acquired and half at the market value at your father's death.

If the property is gifted to you, your mother is likely to suffer a substantial capital gains tax charge as she will be treated as disposing of the property at market value. You would be treated as acquiring the property at market value and if you sold it immediately there would be no further CGT. In addition, your mother would be treated as having made a Potentially Exempt Transfer (PET) for Inheritance Tax (IHT) purposes and this would be liable to IHT in the event of her death within 7 years (mitigated by any CGT she has paid).

You comment that your parent's main residence was "gifted to another" 12 years ago. If your mother still lives there, it is likely that she will still be treated as owning it for IHT purposes due the the Gifts With Reservation of Benefit (GROB) rules.

There are a number of ways of extricating your family from these tax problems involving discretionary trusts, residence, and possible a deed of variation.

I strongly urge you to seek professional advice before taking any action and to act quickly before time limits and changes to legislation limit your options.

My firm specialises in this area of taxation. If you would like us to assist you further we would be delighted to do so.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com