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bigduckontax
bigduckontax, Accountant
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Capital gains question regarding property Bought property

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Capital gains question regarding property
Bought property in join names of husband and in 2004 £144k
Got divorced in 2008 property transferred to husband sole name property value £150kLived in property full time.
Husband remarried in 2008 gave property to new wife who took out new mortgage property value £175k
Both remained in property as main home until November 2011 when moved away.
Rented out from 2011 until date.
Wife Looking to sell property, sale price expected to achieve what do I pay cgt on?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to ba able to help you with your question. Your question is a tad confusing, I assume that you are the husband. Your first wife transferred her sole or main domestic residence, the property jointly owned with your then husband, on divorce. Private Residence Relief (PRR) applies to this disposal and relieves any gain at 100%. She has no Capital Gains tax (CGT) liability in this matter. Your second wife does have a CGT liability as the property was rented out for a relatively short period, but for the last 18 months she is deemed to be in residence even if this is not the case. Her total ownership time is say 96 months, rental period (allowing for the last 18) 35 months. Thus 35 / 96 [say 36.5%] of any gain is exposed to CGT. Deduct non cumulative Annual Exempt Amount (AEA) of 11.1K and Lettings Relief (LR) up to 40K depending on the rentals received and the remaining sum is taxable at 18% or 28% or a combination of the two rates depending on your second wife's income including the gain in the tax year of sale. Without quantitative data I cannot fully calculate the position. Mortgages are irrelevant in CGT computations. You would appear to have no CGT in this matter at all as you transferred your sole or main domestic residence to your new wife in 2008. I do hope that you find my reply of assistance.
Customer: replied 1 year ago.
Thank you, it's a slightly confusing one.Just to clarify a final point, what purchase price is used to calculate the gain, the original price in2004 ?
Expert:  bigduckontax replied 1 year ago.
Your second wife's CGT liability will be based on the current market value as at the date you transferred the property to her plus costs of transfer plus any improvements eg installation of double glazing, central hearing, extensions etc since, but not routine maintenance which can be used to offset rental income during the letting period. The selling price will be net of selling costs including advertising. The difference between the two is the gain subject to CGT as I told you in my original answer. I am sorry that it is so confusing, but CGT is not always easy to get one's head around, I do hope I have solved your conundrum. Please be so kind as to rate me before you leave the Just Answer site.
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Customer: replied 1 year ago.
Thank you great advice and clarity
Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.

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