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Where Taxpayers and Advisers Meet

Who pays tax on sale of inherited property to sibling

londongirl
Posts:1
Joined:Wed Aug 23, 2017 3:56 pm
Who pays tax on sale of inherited property to sibling

Postby londongirl » Wed Aug 23, 2017 4:04 pm

My partner has inherited from his mother a third share in a Cornwall cottage along with his two siblings. The cottage was valued at £345K in June 2017, probate was granted and the estate tax on the entire estate was paid in July 2017. The estate has not distributed the final sums and is still open. The name on the title deed is still in the name of the decedent.

His two siblings now want to sell their shares in the cottage and he wants to buy it. They are asking for a sale price of £375K of which he would pay 2/3 of this value to them.

My question is, is this sale a re=evaluation of the value of the estate, or a CGT transaction. Is the capital gain within the estate, so that all beneficiaries (including my partner) would incur the tax, or this this a sale outside of the estate, whereby only the sellers would incur the CGT? If they just took money from the estate instead of share in the cottage before the final distribution, would this change anything?

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Who pays tax on sale of inherited property to sibling

Postby AGoodman » Wed Aug 30, 2017 11:54 am

This is a capital gain of £30,000 and will also incur stamp duty (SDLT).

The best solution would be for the executors to appropriate the property to the three in equal shares and he then immediately buys a third share from each of the other two. Each seller will make a gain of £10,000 which will be absorbed by their personal exemptions. SDLT would be payable on the 2/3rds.

The real issue is whether the property has really increased in value by almost 10% in 2/3 months. HMRC may not believe that.

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

Re: Who pays tax on sale of inherited property to sibling

Postby maths » Wed Aug 30, 2017 12:18 pm

As it appears that the estate has not yet been fully administered the property currently resides with the executors.

The executors could appoint the respective interests in the property out to each of the three siblings. Two of them would then each sell their 1/3rd interest to your partner. Each selling sibling would be exposed to CGT on any gain made (post probate) but each would also be able to use their annual exempt amount to mitigate any CGT charges and the rates of CGT may be 18% and/or 28%.These sales would occur outside the estate.

Sales may incur SDLT on part of the purchaser.


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