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15 posts

in Cutting Tax
Mum gifted her bungalow to myself and brother in 1997 so we were 'tenants in common'. I lived in another property, but moved into mum's property in 2016 as she needed caring for and she eventually went into a home, but unfortunately died last year. I have sorted out my capital gains tax with reference to my other property as sale was completed recently. I was not liable for CGT at the property I now live in as this is my main home. I will need to complete a TR1 form to take my brother's name off the deeds and will give him half the value of the property to buy him out. However, we are unsure how my brother's CGT should be evaluated - does he just pay CGT for the total money received or is it worked out in a different way as it is payment for his share of the property?
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Replies
What was the logic for the gift in 1997? It would have been a deprivation of assets for benefit legislation. It stopped the CGT free uplift on your mother's death, but the house would have remained in her estate for inheritance tax purposes as a gift with reservation. There would have been a potentially exempt transfer on her moving out, but that was within seven years of her death. What was her estate worth? If she had a life interest in a settlement, that changes all the analysis.
You'll also have a potential CGT liability on the eventual sale of your mothers house which you now live in as it wasn't your "main residence" for the 20 years when you weren't living in it and were living elsewhere.
You can only have one "main residence" at a time. There are now very limited allowances for cross-over periods (basically just last 9 months of ownership).
A valuer (talk to an estate agent as they often employ qualified valuers) will be able to give you a value today and in 1997. It is possible that a value was carried out in 1997 for probate, but unlikely.
There are still the inheritance tax issues, as well as whether the arrangement that your mother could live in the property until her death were sufficient to create a life interest settlement for her, which may affect the capital gains tax position. Was there a deed of variation of your father's estate?
For historic valuation you should employ a RICS surveyor.