Capital Gains Tax

tetrarch

Mrs Tet will be inheriting a third of her late Mother's estate. My MIL passed away in October 22. The estate is split about 60% Real Estate and the remainder cash or equivalents

Given that there will likely be a capital loss from the probate. Is it possible to specify by DoV that her third is explicitly coming from the property such that any capital loss after the can be carried forward against another future capital gain from another asset that she will be selling from outside of the estate?

Regards

Tet

Keep_pedalling

The losses currently belong to the estate so they can’t be used to offset her personal gains. 

tetrarch

I'm not sure I understand. If gains are taxable, then surely losses are offsettable?

https://www.homesellingexpert.co.uk/guides/capital-gains-tax-on-inherited-property

Regards

Tet

poppystar

tetrarch said:

I'm not sure I understand. If gains are taxable, then surely losses are offsettable?

https://www.homesellingexpert.co.uk/guides/capital-gains-tax-on-inherited-property

Regards

Tet

But as KP said the losses belong to the estate - so yes, if the estate had made gains they would be offsettable but it sounds from your post as if the gains are your wife’s. 

tetrarch

The "losses" I am referring to are the likely reduction in the value of the house since the valuations in October. Beginning the process of clearing the house we've discovered some areas that will likely bring the price of the house down upon sale. 

I understood that the estate is as it stood at the date of death. Thus any gains would belong to the beneficiaries. What I am trying to establish is whether the real estate losses can be apportioned to one of the beneficiaries and create a CGT loss.

Regards

Tet

poppystar

I get what you want to do but surely the only way the losses could be assessed as being your wife’s is if she actually received the loss somehow? ie.got less than her share of the inheritance would otherwise have been. Even if that were possible, and that is unlikely as the split of the estate should be done on final value, she’d have suffered an actual loss so would end up losing more than the tax she would save if offset.

Had she inherited the whole house then she would have a loss but it sounds from your post that that is not the case and the house simply forms part of the estate that is being liquidated prior to distribution of the estate. Yes, it’s valued at date of death but distribution is done on the final value of the estate.

Keep_pedalling

Think of the estate as a separate entity that has its own allowances. None of those allowances can be passed to individual beneficiaries. The only way a loss on the original valuation can be offset is from a gain on other assets held within the estate. People are often advised to overvalue property slightly to avoid the estate ending up with a CGT liability, in this case it seems to have been overvalued because of unknown defects and the loss is therefore not even a real one.

The best way for your wife to reduce any potential gains she is sitting on is to crystallise enough to use up this years allowance in full before the allowance drops to £6k on April 6th. If you have not used up this years allowance then she can double that up be gifting some of those assets for you to dispose of. This does rather assume that these are liquid assets not a second property where it is not possible to do this.