CGT advice and calculation check please :)

silvercar

skr80 wrote: »

Yes - thats correct Purdyoaten2. To explain that parents needed the money, and we had a close family friend that required accommodation so we made a conscious decision to pay as much as we did - helping out both whilst maybe not making a sound financial decision (for us anyhow) at that time...

For the purposes of the tax calculation, think of it as purchasing 25% share at market value plus making a gift to your parents.

skr80

[Deleted User] wrote:

In both your and your wife's case it looks like the calculation for each is:

Sale Price £34500
less legal fees £750
Net Proceeds £33750

less cost £25000

Gain £8750 each - covered by annual exemption.

Thank you very much for the quick reply. Could I ask how you got to £34500 sale price - is it 25% of the now sale price less the original purchase cost?

silvercar

[Deleted User] wrote:

In both your and your wife's case it looks like the calculation for each is:

Sale Price £34500
less legal fees £750
Net Proceeds £33750

less cost £25000

Gain £8750 each - covered by annual exemption.

I would say the cost to you and your wife each separately is 12.5% of 60000 plus 12.5% of 85000 = 18125.

You can probably add £125 on as you would have had the legal costs of the transfer.

So the gain would be 33750-18250=15500.

CGT allowance of £11100, leaves £4400 to be taxed at 18%/ 28%.

silvercar

skr80 wrote: »

Thank you very much for the quick reply. Could I ask how you got to £34500 sale price - is it 25% of the now sale price less the original purchase cost?

Sale price divided by 4, as the 4 of you now own 25% each.

[Deleted User]

silvercar wrote: »

I would say the cost to you and your wife each separately is 12.5% of 60000 plus 12.5% of 85000 = 18125.

You can probably add £125 on as you would have had the legal costs of the transfer.

So the gain would be 33750-18250=15500.

CGT allowance of £11100, leaves £4400 to be taxed at 18%/ 28%.

Ah - so the market value DOES replace the price paid - Thanks - just couldn't remember in overvalue cases!

silvercar

[Deleted User] wrote:

Ah - so the market value DOES replace the price paid - Thanks - just couldn't remember in overvalue cases!

I'm happy to be corrected, but I thought it was always market value in connected parties. It prevents people overpaying by stupid amounts to get around inheritance tax laws and the like. (Obviously not in this case.)

booksurr

the gain is time apportioned if you have a claim to PRR and Letting relief, you have neither as it has never been your home.

you purchased your shares at market value in 2001 (60,000 x 25% = 15,000) & 2003 (85 x 25% = 21,250). As you paid above market value in each case the base cost is restricted to market value, not what you actually paid

so you have a base cost of 36,250/2 = 18,125 and your wife has the same base cost for her share

at the point of sale you and your wife owned 25% each of the property
(ignoring any buying and selling costs) the share of the sale was 135,000 x 25% = 33,750
your gain is 33,750 - 18,125 = 16,625
your wife's gain is 33,750 - 18,125 = 16,625

[Deleted User]

silvercar wrote: »

I'm happy to be corrected, but I thought it was always market value in connected parties. It prevents people overpaying by stupid amounts to get around inheritance tax laws and the like. (Obviously not in this case.)

Yes - I remember now that it is market value in all cases with connected parties. (I was afraid to exit out of my calculations to look it up which I was doing on an ipad)

[Deleted User]

booksurr wrote: »

the gain is time apportioned if you have a claim to PRR and Letting relief, you have neither as it has never been your home.

you purchased your shares at market value in 2001 (60,000 x 25% = 15,000) & 2003 (85 x 25% = 21,250). As you paid above market value in each case the base cost is restricted to market value, not what you actually paid

so you have a base cost of 36,250/2 = 18,125 and your wife has the same base cost for her share

(ignoring any buying and selling costs) the share of the sale was 109,000 x 25% = 27,250
your gain is 27,250 - 18,125 = 9,125
your wife's gain is 27,250 - 18,125 = 9,125

each of your therefore (potentially) has no net liability assuming each of you still have at least 9,125 remaining from the 11,100 personal allowance available in the year of sale

The proceeds were £138000, not £109000.

booksurr

[Deleted User] wrote:

The proceeds were £138000, not £109000.

they were 135 and I was already in the process of correcting that when you posted so you are now quoting a post which no longer exists :cool: