Appropriation of property

When appropriating property to beneficiaries which is then sold is the increase in value net of costs of sale? I have to sell a property and the beneficiaries are charities. The increase in value will be below the executors CGT allowance if it is net of sale costs but will be over if costs cannot be deducted. Because the beneficiaries are charities I will need to get an RICS report if I have to appropriate.
sharon edelstyn
Phoenix Legal Group

You take the net sale proceeds so can therefore deduct the agents commission, legal fees, conveyancing disbursments and also the very useful allowable expenditure allowance for PR’s. If,as you say, this then lowers the gain to below the Executors CGT allowance then no need to appropriate.
Robert Tozzi
Burley and Geach

So to be clear, your clients are the executors and are proposing to appropriate a property prior to sale, to charity beneficiaries. The value has increased since probate.

The general rule is that appropriations should be at market value as at appropriation so as to achieve equality between those beneficiaries taking assets in specie and those taking cash.

However for CGT s62(4) TCGA (or s64(4) depending on whether the asset is specifically given or part of residue) the probate value is deemed to be the acquisition cost for the beneficiary.

The logic is that beneficiaries have an equitable interest in the assets of an estate subject to the executors prior rights of indemnity in respect of administration expenses, estate liabilities, tax etc, so that an appropriation is doing no more than recognising the extent of the equitable interest.

In short then you don’t need to worry about whether costs are deductible because whatever the gain, it will be charity exempt.

Simon Leney
Cripps LLP

Sorry to be dense but is the gain exempt even if the property is not appropriated but is sold by the executors? The property is not specifically gifted but forms part of the residuary estate and the charities are the sole beneficiaries.

sharon edelstyn
Phoenix Legal Group

You are not being dense Sharon. If you do not appropriate the sale is by PR’s and CGT rules apply - if you appropriate they sell as bare trustees for the charities who are CGT exempt.

Kathy Melkerts
Melkerts Solicitors

Unless the residue has been ascertained for cgt purposes, in which case it is a sale by the charities. Best to appropriate to avoid uncertainty if there are sufficient other assets to cover admin expenses etc

Simon Northcot