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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15942
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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What tax is payable when someone dies between exchange and

Resolved Question:

What tax is payable when someone dies between exchange and completion on the purchase of a property?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi. Was the death that of the buyer or seller? Which tax are you thinking of exactly?
Customer: replied 2 years ago.
The death was of the purchaser.
Customer: replied 2 years ago.
IHT tax. When the Probate valuation was done, it was done on the assets held including stocks and shares and the main dwelling. The cottage which was being purchased that was exchanged and not completed was not valued. If the money is in the Bank then surely the cottage cannot be added to the IHT400 also.
Expert:  TonyTax replied 2 years ago.
Thanks.
For Capital Gains Tax purposes, the date that contracts are exchanged is the tax point so if the exchange date and the completion date are in two different tax years, the sale is deemed to have occurred in the earlier tax year.
If the transaction is completed despite the death of the buyer, then there is really no difference to the tax situation so that is why I asked you which tax you are thinking of. Stamp Duty may be payable by the buyer's estate and capital gains tax may be payable by the seller.
Assets that are held at death are included in an estate for IHT purposes. If the purchase did not complete, then the cottage should not form part of the buyer's estate. As you say, the cash to buy the property was still in the deceased's estate so you would not double count.
If you look at the links below, you will see that there are contradictory views as to whether a property transaction can continue if the buyer dies before completion.
http://www.iwc-ltd.co.uk/blog/death-following-exchange-of-contracts/
http://www.practicalconveyancing.co.uk/content/view/11714/1/
I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
Thank you. I think that as the money was in the Bank account and technically the cottage was not the purchaser's at the date of death, although "it is held in trust by the seller..." then perhaps only CGT should be charged, if anything? A deposit had also been paid across to the seller. I just need to know what grounds I have for my argument and whether they are sensible....
Expert:  TonyTax replied 2 years ago.
Is the purchase likely to happen at some point?
Customer: replied 2 years ago.
The purchase has happened 16 months after death.
Customer: replied 2 years ago.
There was no S/D as the cottage was below the SDLT threshold.
Expert:  TonyTax replied 2 years ago.
I would include the cash as opposed to the purchase price of the property in the IHT400. The IHT400 declaration is supposed to represent the deceased's worth as at their death. I would also put a note in the additional information box explaining the situation around the property. As far as any IHT liability is concerned, it will be based on the value of the estate at death.
If the property is sold by the executors of the estate at a profit which may have accrued since contracts were exchanged then the executors will have a CGT liability.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
OK. Thank you very much, I can see where I am going now. Sue
Expert:  TonyTax replied 2 years ago.
Thanks.
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