After inheriting our father’s half of my parent’s estate in 2009, my sister and I then became co-owners of our mother’s house (they were tenants-in-common). Sadly, she died in October, which means we have inherited her half of the house and plan to sell the property. Both my sister and I own our own homes with our spouses, so are we presuming we will have to pay capital gains tax (CGT) on the gain from 2009 to 2019, taking out the first inheritance of 25% each in 2009 and the second inheritance in 2018 of 50% of its present value?
Is it possible to gift 50% of our share to our respective spouses to double the CGT allowance and reduce CGT liability?
You are correct on all counts. You would incur CGT on the increase between 50% of the house sale proceeds and the initial inherited value in 2009, and then on any increase between the other 50% of the sale proceeds and the inherited value in 2018.
The tax charge would be split equally between you, but the amount you each pay would depend on your respective tax status. You could certainly reduce the CGT by utilising your spouses’ allowances as suggested.
My only proviso would be to ensure that both you and your sister are comfortable with dividing the inherited asset this way. What happens, for instance, if the property does not sell and you are left with four owners who may have differing views on what should happen to it? Are you also comfortable with dividing the sale proceeds four ways?