New queries, issue 4578

Mother and son

CGT implications of transfer of property to son while continuing to live there.

Mrs Smith is thinking of giving 90% of her home to her son and continuing to live in it. She is not doing this for tax reasons and understands that the gift is not effective for inheritance tax and will be included within her estate on death because of the reservation of benefit rules.

My query concerns the capital gains tax implications of the transfer. There will be no tax on the gift because Mrs Smith is gifting her main private residence. The son is therefore deemed to acquire the property at its value at the date of gift let’s say £400 000. If the property is worth £500 000 at the date of Mrs Smith’s death and the son sells the house immediately what is his base cost for...