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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15758
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am left some shares under a bequest of a will of someone

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I am left some shares under a bequest of a will of someone who has died. If they are sold as per the instructions in the will I will be charged both capital gains tax (first) and then inheritance tax on the balance. If I take the shares instead then presumably I will be charged IHT on the market value only, with the capital gains liability deferred. Is that correct?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Inheritance Tax is paid by the executor of the deceased estate, not the beneficiaries, and only after all debts have been settled is the balance of the estate assets distributed to the beneficiaries. Sometimes assets need to be sold to settle debts and IHT but not necessarily if it is a cash rich estate. If the shares are passed to you, your cost for CGT purposes will be their market value at the date of death of the person who left them to you. If you sell them for more than that, then the first £11,100 of your gains will be tax free due to the annual CGT exemption every individual is entitled to and you will pay CGT on the balance at 18% or 28% or a combination of the two rates depending on your income level. Some of those shares may have had to be sold by the estate to contribute towards paying debts and IHT. If the shares are sold by the estate, their cost will be the same for the estate as described above for you. The estate is entitled to a CGT exemption for the tax year of death and the following two tax years. It will pay CGT at 28% on any balance of the gain left after deduction of the annual CGT exemption. Either way, IHT may affect what you get. I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
I should have mentioned that I am entitled to the residual estate so effectively I could be considered as paying both taxes, in that the lower the taxes payable by the estate, the greater the net residual estate I receive. If I take the shares then is capital gains tax payable by the estate, or is this deferred and, presumably the base cost for CGT purposes being that of the original purchaser?
Customer: replied 1 year ago.
that's all!
Expert:  TonyTax replied 1 year ago.
IHT is paid by the estate, not you, though I take your point.
If you take the shares, there will be no CGT until you sell them. As I said in my previous post, your cost for CGT purposes will be the value of the shares on the date of death of the person who left them to you. The original cost is irrelevant.
Customer: replied 1 year ago.
Understood. But presumably then, the estate pays both capital gains tax and IHT on the shares regardless of whether the shares are sold or not?
Expert:  TonyTax replied 1 year ago.
The estate may pay IHT on the probate value of the shares depending on the total estate value.
The shares being transferred into your name from the estate does not constitute a disposal for CGT purposes. I would have said so if it did.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15758
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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