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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My mother is seventy years of age and has been taking care

Resolved Question:

My mother is seventy years of age and has been taking care of a relatives property for several years. She is very fortunate as our relative now wishes to give the property to my mother (not just 'gift' it) and once the property deeds are fully my mothers name she intends to sell the property and live more comfortably off the profit.
I envisage my mother's profit (less estate agency charges, small mortgage repayment etc) will be £200k GBP. The current property value is 250K.
In addition, my mother already owns her primary residence outright (value 250K) as well as another property based locally which is occupied by my brothers. The property occupied by my brothers was originally in my late fathers name and the deeds have now been transferred over to my mothers name. The value of the third property is also 250K.
My mothers sole income sources now are very low; she receives state pension as well as a small pension from Ireland. She would be classed a low income earner at present.
My question for you is will my mother be required to pay any tax on the sale proceeds from the property she is been given by our relative (property noted in my first pharagraph)?
Thank you in advance for your help.
Warm regards
Denise
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

If your mother is gifted or given a property by her relative, she will be deemed to have acquired it at its open market value at the time of the gift. That market value will be her "cost" for Capital Gains Tax purposes so if she sells it for a similar sum there is unlikely to be a taxable capital gain. She can deduct expenses she will incur when you sells the property (legal fees, selling agent fees etc) from the disposal proceeds.

An individual can make tax free capital gains in any one tax year of £11,000 so your mother would need to sell the property for more than the sum of the market value of the property at the time of the gift, the £11,000 Capital Gains Tax exemption and the disposal expenses before she needs to concern herself with CGT.

As far as the relative is concerned, unless the property has been their main home for the whole period of their ownership of it, they may have Capital Gains Tax to pay as they will be deemed to have "sold" it to your mother at its open market value which will probably be higher than the price the relative paid for it when they bought it. This tax treatment will apply if your mother and her relative are "connected" for tax purposes. The definition of "connected persons" is here. In addition, as you will read here and here , if the transaction is not between connected persons but is a bargain not made at arms' length, then the market value rules can still apply.

I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15838
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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