Moolahasker
New Member
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Hi,
Let's say Alice and Bob bought a house in 1991, had kids and and paid off the mortgage.
Then they separated and Bob moved out in 2000 and divorce finalised in 2005. As part of the divorce, Bob became owner of 40% of the house, Alice retained 60% and remained in the house.
Alice then died in 2016 (keeping the numbers easy here) leaving her part of the house to the kids. Bob and the kids wants to sell the house and Bob wants the kids to get the proceeds from his part of the house now instead of waiting for his own passing.
What follows is full of my assumptions, so please feel free to set me straight if I'm assuming wrong.
Say the house was bought in 1991 for 50,000 and was sold for 150,000 in 2016. 40% of that is 60,000, so that's Bobs part of the proceeds. It's made up of 20,000 being 40% of the initial investment, and 40,000 which is gain.
I believe the house value at the time of the divorce and at the time Bob moved out is irrelevant, and that in the eyes of revenue, the only date that the house ceased to be Bobs ppr matters.
So, it was Bobs ppr for 9 years, and not his ppr for 16 years. Revenue computes that Bob is due to pay CGT on a portion of the 40,000, based on those years, so (16 - 1)/25 equals 60%. So, Bob has to pay CGT on 60% of the 40,000 gain, which is 24,000. Then, 33% of that is 8,000.
Bob pays (8,000 - 1,270) of his full 60,000 to revenue and distributes the (52,000 + 1,270) to the kids. The kids also inherit the 80,000 from Alice between them.
Do I have this method of calculation correct, or am I missing something which makes the tax bill bigger or smaller? Does the divorce complicate matters, or the value at the time of the divorce? I realise some detail or agreement in the divorce agreement might confound it, but let's assume not for now.
If Bob needs or wants professional advice on this, what kind of professional does he need? Does he need a solicitor or a tax accountant or something else? Do you have any recommendations for such?
Thanks!
Let's say Alice and Bob bought a house in 1991, had kids and and paid off the mortgage.
Then they separated and Bob moved out in 2000 and divorce finalised in 2005. As part of the divorce, Bob became owner of 40% of the house, Alice retained 60% and remained in the house.
Alice then died in 2016 (keeping the numbers easy here) leaving her part of the house to the kids. Bob and the kids wants to sell the house and Bob wants the kids to get the proceeds from his part of the house now instead of waiting for his own passing.
What follows is full of my assumptions, so please feel free to set me straight if I'm assuming wrong.
Say the house was bought in 1991 for 50,000 and was sold for 150,000 in 2016. 40% of that is 60,000, so that's Bobs part of the proceeds. It's made up of 20,000 being 40% of the initial investment, and 40,000 which is gain.
I believe the house value at the time of the divorce and at the time Bob moved out is irrelevant, and that in the eyes of revenue, the only date that the house ceased to be Bobs ppr matters.
So, it was Bobs ppr for 9 years, and not his ppr for 16 years. Revenue computes that Bob is due to pay CGT on a portion of the 40,000, based on those years, so (16 - 1)/25 equals 60%. So, Bob has to pay CGT on 60% of the 40,000 gain, which is 24,000. Then, 33% of that is 8,000.
Bob pays (8,000 - 1,270) of his full 60,000 to revenue and distributes the (52,000 + 1,270) to the kids. The kids also inherit the 80,000 from Alice between them.
Do I have this method of calculation correct, or am I missing something which makes the tax bill bigger or smaller? Does the divorce complicate matters, or the value at the time of the divorce? I realise some detail or agreement in the divorce agreement might confound it, but let's assume not for now.
If Bob needs or wants professional advice on this, what kind of professional does he need? Does he need a solicitor or a tax accountant or something else? Do you have any recommendations for such?
Thanks!