CGT and IHT

m400

In 1989 my parents gifted a property then valued at £130k to myself and my two siblings.
One of my sisters passed away in May 2014 and in her Will she bequeathed her one third share to myself and my other sibling. At the time of her death, the property was valued at £360k.
As her Executor I ensured that £120k was included in my deceased sister’s estate and Inheritance tax was paid as her estate exceeded the threshold.
The property was then sold in Dec 2015 for a value of £390k. As Executor I informed HMRC of the difference in valuation and final sale price re IHT but they did not request any further Inheritance tax payment.
I have tried numerous times to speak with a Technical Adviser at HMRC but to no avail.
I am confused re the CGT calculations for this scenario as Inheritance tax has been paid based on her 1/3 share = £120k.
Any helpful feedback would be most welcome re this calculation.

booksurr

you have 2 elements to your ownership and therefore your CGT liability:

a) the gain on your original share: 390 - 130 = 260 x 1/3 = 86,666

b) the gain on your new share since your inheritance of the additional 1/3 from your sister: 390 - 360 = 30 x 1/3 = £10,000

having calculated the two components separately as above your overall net liability is then a total gain of 96,666 - your personal allowance and any costs of selling etc (assuming of course it is not your main home so you could claim other relief on it)

as you have chosen not to adjust the IHT arising from b) then you now have to face the CGT on the 10k gain accruing since you inherited her share. Obviously the gain she made from the original 130 acquisition "cost" until the date of her death has been covered under her IHT calculation, leaving you liable only for the additional gain on your inherited 1/3 since that date

Keep_pedalling

Who has lived in the property since it was gifted?

m400

We would use the property for holidays but it was not being let so was basically vacant.

Keep_pedalling

m400 wrote: »

We would use the property for holidays but it was not being let so was basically vacant.

In which case it is staight forward , and booksurr's reply provides the figures. If you have any assets that are carrying a loss such as bank shares purchased before the financial melt down now would be a good time to dispose of them to offset your gains on the house.

m400

That's a good point about previous years losses!

Thank you to both of you for your helpful feedback.

I feel much clearer about tackling the Self Assessment now!

jimmo

booksurr wrote: »

b) the gain on your new share since your inheritance of the additional 1/3 from your sister: 390 - 360 = 30 x 1/3 = £10,000

Shouldn't that be: additional 1/6 from your sister...... £5,000?