Capital Gains

When my mother-in-law died, my wife was made part-owner of my father-in-law's house (to avoid some other tax (inheritance?) I believe).

We are now looking to sell our house and my father-in-law sell his house to combine funds to buy a house together.

Is my wife liable for any CGT, since the other house is not primary residence, even though we are combining monies to get a property together?

If she is, is there any way to reduce the amount of CGT payable (such as making myself and my two children part-owners of the other property to utilise everyone's allowance)?

Advice appreciated

Martin

Reply to
Martin Jones
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Yes, your wife has a *potential* liability to CGT, based on the probate value of her share.

If any CGT is payble - after you have done the calculations - then a transfer to you may mimimise the overall CGT liability. Transfers to the children may trigger a CGT bill, as only inter spouse exemptions are exempt - but it still might be an worthwhile option. From a non tax point of view, you run the risk of the children just taking their share of the proceeds. It might be a PET (Potentially Exempt Transfer) for IHT.

If your father in law died less than 2 years ago, a Deed of Variation might be worth considering should you want to make the children co-owners.

IMHO, multiple ownership of a home can be recipe for disaster.

Professional advice recommended.

Reply to
Doug Ramage

You mean mother in law, don't you? Father in law is still alive.

By the look of it, a Deed of Variation was *already* drawn up, to make mother-in-law's notional half of the house pass straight to wife instead of to father-in-law first and subsequently to wife.

Reply to
Ronald Raygun

Yes, but depending on how long ago this was, there may not have been a lot of gain. Only the increase in value since mother-in-law's death would be taxed. The first £8200 of gain is exempt (if they sell in the current tax year, and if she isn't realising any other gains in the same year).

As Doug has already mentioned, your wife can give you part of her share without the transfer being taxed, and then if you sell jointly you get two lots of £8200 against the gain.

Using *your* children as well? It'll end in tears. It won't help, because any shares you give to the children will incur CGT. It's conceivable, though, if your wife first gives you half her share, and she then gives half her remaining share to on child, and you give half your share to the other child. At this point you, your wife, and your two children will each own 1/8 of the house, and your father in law half.

You then wait for the next tax year boundary before all selling your shares, then you will have been able to use 4 lots instead of just 2 lots of annual allowance of £8200 (and the amount will probably be bigger next year anyway). But whether the tax saving of at most £6560 (ish) is worth the hassle of involving the children in co-ownership, not to mention the conveyancing and recording overheads, has to be questioned.

Reply to
Ronald Raygun

Oops. Yes. :)

Very possibly. Not sure, off the top of my head, if more than one DOV is permitted within the 2 year time period. Probably, Yes - but perhaps not in relation to the distribution of assets already varied (which would apply here)?

Reply to
Doug Ramage

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