We dealt with an estate some 10+ years ago. The property in the estate was subject to life interest trust in favour of the deceased’s husband, who has now died.
At the time of the deceased’s death, the property was valued at £500,000. There was a trust deed in place so that the first £60,000 belonged to her and the rest was held 50/50 between her and her husband, so the value at the date of her death was £280,000.
When the husband died, the value of the property was £650,833 and so the deceased share at the time of his death would have been £355,416.
When the IHT400 was completed for the husband’s estate, we declared his interest in the trust.
The property has now sold for £675,000 and so the deceased’s share would equate to £367,500.
My question to you is, would there by an automatic uplift to date of death figures for this estate, so that the CGT liability would only be calculated on the increase between £367,500 and £355,416, or would the CGT liability be on the increase in value since the original death i.e. £367,500 and £280,000?
We dealt with an estate some 10+ years ago. The property in the estate was subject to life interest trust in favour of the deceased’s husband, who has now died.
At the time of the deceased’s death, the property was valued at £500,000. There was a trust deed in place so that the first £60,000 belonged to her and the rest was held 50/50 between her and her husband, so the value at the date of her death was £280,000.
When the husband died, the value of the property was £650,833 and so the deceased share at the time of his death would have been £355,416.
When the IHT400 was completed for the husband’s estate, we declared his interest in the trust.
The property has now sold for £675,000 and so the deceased’s share would equate to £367,500.
My question to you is, would there by an automatic uplift to date of death figures for this estate, so that the CGT liability would only be calculated on the increase between £367,500 and £355,416, or would the CGT liability be on the increase in value since the original death i.e. £367,500 and £280,000?
Sorry… it was clear in my head! Let us try that again…
We dealt with an estate of “A” some 10+ years ago. The property in A’s estate was subject to life interest Will trust in favour of the deceased’s husband (B), who has now died.
At the time of the A’s death, the property was valued at £500,000. There was a trust deed in place so that the first £60,000 belonged to A and the rest was held 50/50 between A and B, so the value of A’s share at the date of A’s death was £280,000.
When B died, the value of the property was £650,833 and so the trust’s share at the time of B’s death would have been £355,416.
When the IHT400 was completed for the B’s estate, we declared B’s interest in the trust.
The property has now sold for £675,000 and so the trust’s share would equate to £367,500.
My question is, would there by an automatic uplift for the trust to B’s date of death figure , so that the trust’s CGT liability would only be calculated on the increase between £367,500 and £355,416, or would the CGT liability be on the increase in value since A’s death i.e. £367,500 and £280,000?
So the trust deed preceded the death of A? Its terms were that on a sale of the property A would receive £60k plus 50% of the balance. But the property was then unsold and A’s share was worth £280k and B’s £220k. So No discount for A’s share being a joint interes? Not agreed per s274 TCGA 1992 because left on an IPDI for B her husband and so exempt for IHT.
On the death of B the entire property is chargeable to IHT, part in the QIIP trust and part in his free estate. No discount as the entire property is beneficially owned by him for IHT. Not so for CGT as the trustees and B are separate taxpayers. The revalued base cost is £650,833 but strictly minus a discount of 10%, or 15% if B was in occupation, should be applied to each separate share but each gain is tax-free per ss. 62(1) and 72(1) TCGA. I cannot see that the CG Manual deals with how s274 applies to part shares: does it treat the gross value as the CGT value or do the discounts still have to apply? IHT related property rules do not operate here but when they do how does s274 operate when the deceased spouse’s share is chargeable e.g. left to non-exempt person?
Strictly the sale price does not affect the date of death value although it may affect the negotiation of that if it occurs before the value has been agreed. The OP does not state the interval between death and sale but the longer it is the less justification for either party substituting the sale price. Tactically where exemption or single or double NRBs will cover the increase in IHT value taxpayers may argue to substitute the higher sale proceeds to uplift the CGT base cost and HMRC are onto that: CG32234. There is no automatic adjustment for CGT as there is where a claim is made for a lower sale price to apply for IHT per s.191 IHTA. But if the sale occurs very shortly after death and the value has not been agreed there might be an argument that an independent sale price is the best guide to the death value of the property, but still for CGT as discounted for the separate part shares.
So the sale proceeds for the trust are £367,500 and the base cost is £355,416 discounted appropriately unless you can argue that s274 prevents discounts applying and/or that £367,500 should be substituted as the CGT death value, which will however increase the IHT death value.
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