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Where Taxpayers and Advisers Meet

CGT on a property half-owned by a Trust

canarydan23
Posts:1
Joined:Tue May 17, 2022 11:43 am
CGT on a property half-owned by a Trust

Postby canarydan23 » Tue May 17, 2022 11:53 am

Hi all.

I've got quite a complicated CGT/inheritance/trust-based query that I'm struggling to get my head around.

My Mum died in 2010 and her will stipulated that her 1/2 of her home would be held in trust and inherited by the beneficiaries (myself and my sisters) either at the discretion of the Trustees (me, my older sister, my Dad and my Auntie) or when Dad dies. The other half of the house is owned by my Dad. He continued to live in the home until 2016 and since then it has been rented out.

The tenants will be looking to move out in a year or so, and Dad has said he wants to sell the house and we all agree that that point it makes sense to distribute my Mum's half of the house to us kids at that point.

So my question is, what would be CGT liability be? I believe for my Dad, he would only be liable for CGT based on the asset gain since 2016 when it ceased to be his main residence, but how does it work for the other half share of the house? Do we pay CGT based on the value increase since my Mum died in 2010? And how would we find that value out? I suspect at some point a value must have been declared when the property ownership was sorted. I have a copy of the houses register and that states that value as £220,000, but I'm not sure where that value came from, was it the value at the point the register was requested or was it the value when the register was last amended?

Inheritance tax is moot because the values involved do not exceed the nil rate band for IHT.

Thanks in advance for any help anyone can give.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT on a property half-owned by a Trust

Postby maths » Tue May 17, 2022 8:40 pm

I assume on mum's death her 50% which she settled on trust gave rise to a op-called IPDI( immediate post death interest) for father.

As and when the tenants move out the trustees can terminate father's IPDI which means you and your sisters then acquire the 50%.
On this acquisition the trustees will be deemed for CGT to sell the 50% at mkt value and reacquire the 50% but holding it as bare trustees for you/sisters.The gain arising on the trustees will be calculated as the difference between the 50% mkt value on mum's death and mkt value when father's IPDI is terminated (say early 2022). However, between 2010 and 2016 ie 6 years father occupied the property and so then 6/12ths approx of the gain is exempt meaning the balancing 6/12ths is subject to CGT.

For you/sisters on sale in say late 2022 you will be each charged to CGT on a share of the gain arising between date father's IPDI is terminated (early 2022) and date of property sale in late 2022 which may be minimal.


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