CGT query on investment property

B

Blue Thunder

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My friend has asked me the following query. She owned a property jointly with her husband bought for €300k approx in 2006. Her husband passed away in 2013 after which the balance of €240k approx on the mortgage was cleared due to a life policy held. If she now wishes to sell the property, is the deemed cost of the property still the €300k or is there a reduction to the cost price due to the value covered by the insurance on death? The house is probably worth in the region of €175k.
 
Just to clarify, it is an investment property and would be liable for CGT. Is my calculation of the gain/loss correct as follows:

Sales proceeds 300
Less: cost (175)
Chargeable loss (125)

Or is the deemed cost of buying the house adjusted downwards for the fact that there was insurance on the mortgage following her husbands death?
 
Does it matter?

There is no gain if the value has dropped so significantly.

I don't think mortgages and life policies play any role in establishing a CGT liability.

mf
 
Your posts are contradictory altho' it might just be your terminology?

Either it was bought for 300K in 2006 and is now worth 175K - from your first post - no CGT liability

Or

Cost 175K to buy and now selling for 300K - gain of 125K - CGT liability likely

The life policy is a separate, unrelated matter.

mf
 
Technically speaking the wife has two costs.

1/2 the original cost €150,000 and the value of the property on the death of her husband. Let's say it was worth €175,000 when he died then €87,500.

So her base cost would be €237,500.

The issue around the proceeds of the life policy is separate. Perhaps coming under the gift tax provisions but being an exempt receipt.
 
Apologies for the confusion, it was bought for 300k in 2006 and is now worth 175k.

There for CGT purposes I think I can ascertain the following?

Sales proceeds 175k

Less: Cost (237.5k)....(150k + 87.5k)
Chargeable loss is therefore 62.5k

In any case from what you are stating the proceeds of the life policy is a seperate transaction and as it is exempt there is no tax due.

Thanks.
 
Your friend should be getting their own advice. The problem with CGT is that, because the values involved are generally big, a minor omission or misstatement of the facts in any given case can have profound consequences. You're safer letting them sort it out themselves.
 
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