CGT husband->wife->other

Suppose I buy a property, and over 2 years it increases in value by 100k. Then I give half to my wife, Then she sells her half to a stranger, Who pays CGT on the profit, me or my wife?

thanks Tony

Reply to
TonyJeffs
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Her share, her profit, her CGT bill.

But the gain would be calculated at your purchase price, not the market value at date of transfer to your wife.

But how would you like to own 50% of a property (and share 50% of any income) with a stranger who may be able to force a sale of the whole property?

Reply to
Doug Ramage

Perhaps the OP is trying to reduce his CGT bill when selling his (non PPR) house to the stranger. Perhaps he is considering giving half to his wife and then both of them selling their halves to the (same) stranger at the same time, thus making use of both their CGT allowances. I''m not sure this would wash with the inland revenue.

Robert

Reply to
robertmlaws

And not only that, but potentially it makes better use of tax bands where a smaller amount of the combined taxable gain would be charged at the higher rate, if at least one of them is not already a HRTP.

But it does. Becasue it's the law.

Reply to
Ronald Raygun

You may be correct.

Part transfer to spouse, followed by sale of both parts should not be a problem to the IR - unless the transferee's share of the sale proceeds ended up in the transferor's bank account.

Reply to
Doug Ramage

(I'm having difficulty posting to usenet)

Hmm Compare this: What if I gave half the house to a stranger. (!!) I thought that the taxman would see such a transaction as being identical to my a)selling half the house to that person at market value and b)simultaneously making a gift to him of the same amount, in which case, I'd be liable for cgt, not the stranger. And I thought it might be similar for husband-wife transfer.

(We're not actually considering actually selling half the house to a stranger, but are considering giving part to a daughter... I wanted to simplify it for clarity.)

Thanks for all the advice. I've learnt a lot from this board, and hope soon to be able to contribute! Tony

Reply to
TonyJeffs

I don't really understand the above.

Are you talking about giving a 50% share of the house to a stranger (daughter?) plus a cash gift of the same value?

The donor is liable for the CGT (although there are collection options against the donee, in the event of non payment by the donor).

Reply to
Doug Ramage

Bitstring , from the wonderful person Doug Ramage said

Except there is no CGT liability on the main residence, if 'the' house is the one the OP is actually living in.

Reply to
GSV Three Minds in a Can

HI Doug On a re-read, I think my first post was ambiguous, and confusing.

So starting from the beginning; in fact simplifying it even more.

Suppose a second house that I own in my name only, which I purchased recently for 30K is currently worth 50K. And suppose I give it all to my wife. The value of the house doesn't change after that point. She sells it for 50k

There's a profit of 20k. Even though I gave it to her,and her bank balance has increased by £50K, it is technically ME who made the CGT-relevant profit, not her. Is that right? ................................................................... What I meant with my second post is: Suppose I gave you the above house for nothing. In the taxman's eyes, that would be exactly the same as: a) I sell you the house for 50K - i.e. You pay me 50K & the house becomes yours.. b)That same day, I generously give you a 50K Christmas present. (The two amounts cancel out, since we both pass 50k to each other;) But looking at it this way clearly illustrates the tax implications. I'm liable for CGT if there's a profit, and theres a gift with reservation issue concerning the £50k gift.

Does that make more sense? and is it right?

Thanks, I understand what you're saying, even though I wasn't clear. Its the giver that's liable for tax on profit at time of sale/gift, and it doesn't make a difference whether it was a gift; the taxman would consider the realistic sale price of it.

Tony

Reply to
tonyjeffs

No. It's her CGT liability, based on her tax band(s) and exemption limit.

No. You would pay CGT on 20K. and I get a free house with a base cost of

50K.

There is no cancelling - you have given me assets of 100K (50k house +

50k cash). There is CGT on UK currency.

No and No. :)

Yes. MV is used for CGT.

Reply to
Doug Ramage

There can be CGT on a main residence, if it has not been your main residence throughout (excepting the last 36 months).

Reply to
Doug Ramage

Sorry to go on... I follow what you're saying, but don't understand the underlying concept. If I give it to my wife, as above, the on-paper profit that I made before the gift is her tax liability. But if I gave it to you rather than my wife, it's my tax liability. Is that right?

Tony

Reply to
tonyjeffs

The reason is that inter-spouse disposals are treated as no gain/ no loss for CGT, and the donee "inherits" the donor's original acquisition value. Thus any CGT falls on the donee spouse when the property is ultimately disposed of.

A gift to another individual (non spouse) is treated as a disposal at MV, so donor has the CGT liability.

Does that clear it up for you?

Reply to
Doug Ramage

Why would it matter if it did? Since inter-spouse transfers are exempt, why should not the transferee be allowed subsequently to transfer their share of the proceeds back to the original transferor?

Reply to
Ronald Raygun

Or if the house comes with garden grounds of a vastness more than in keeping with its style.

Reply to
Ronald Raygun

No you wouldn't get a free house. You bought it for 50k cash.

No, he has given you assets worth 100k *and* you have given him 50k. His question was "If i *give* you the house, is that the same as *selling* it to you and then giving you the proceeds?", and to that the answer is yes.

What?

Reply to
Ronald Raygun

So I was a bit economical with the word "no". :)

Reply to
Doug Ramage

'Cos it could throw suspicion on the earlier "gift" not being genuine.

Reply to
Doug Ramage

Yes, the automatic exemption for "garden or grounds is currently up to .5 of a hectare.

Reply to
Doug Ramage

Hi Doug Yes. Thanks.. I understand that properly, and I can see how it makes sense from the IR's point of view. Sooo -the real situation... I'm going to give half a house to my wife, Then we're each going to each give enough to our daughter each year to fully realise our CGT allowances, for an appropriate number of years. And then, unless daughter decides differently,well sell it.

Thanks for your patience in explaining things to me. I'm very endebted to you. All the best

Tony

Reply to
tonyjeffs

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