Gifted property and IHT and CGT

pulsar99

My wifes mum died just before Christmas and she is now in the process of sorting out the probate documentation. One of the questions on the form has led us to be concerned about the gift of a property back in 1987 and she is not sure what to do.

In 1987 my wifes mum was in a poor state of mental health and to try and safeguard the property it was gifted to my wife. Over the intervening years her mum lived in the property but also spent long periods in care homes. She never paid rent and in the early years paid council tax. In the past three years my wife has let the property (her mum went into a care home) and kept the income in a seperate account and has delared it as her income to the HMRC.

Now her mum has died she would like to sell the property (value in 1987 say £60k and now say £240k) but she is concerned about capital gains tax implications.

The questions are:
1. As the property was gifted but her mum continued to live there, when would the property be considered as my wifes, from a CGT point of view (1987 or 2007)
2.When she completes the probate form are there any issue she should be aware of - the total estate is less than £300K.

We would be grateful for any comments.

CLAPTON

what exactly do you mean by 'gifted' ...
if the property was transferred to your wife in 1887 and so is the legal owner then her ownership wopuld be from 1887.

The situation is for CGT purposes

assuming it is sold after 6th april (rules change then) then

gain = selling price less value at acquisition less costs

so 240,000 - 60,000 - 4,000(selling costs say) = 176,000
tax payable = 176,000 x 18% = 31, 680

however, as you MIL continued to live there the HMRC may challenge the acquisition price on the basis that with a sitting tenant, the value would have been lower.

Artemiss_2

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Take Note