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Capital Gains

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Newbie

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We are in the very early stages of deciding to sell my mother’s investment property that both sons own 25% each and my mother owns the remaining 50%. Both sons became owners of their 25% share in May 2019.

The property was purchased at approximately $81,000 in 1991. The property has been owned outright for 25+ years and solely used for investment purposes. The property was owned by both my mum and dad although when my dad passed away in 2018 my brother and I inherited 25% for the two brothers and my mum retained her 50% share..

The current market value indicates that we could sell for approximately $460,000 (let’s work with this figure)which would mean that my mum receives $230,000 and each of the sons $115,000. We would have to also have to cover legal and realestate costs to sell from these monies.

We have a number of preliminarily questions;

Does my mum have to pay any sort of capital gains tax? If so how much approximately.

Both boys inherited their property shares in May 2019 and no stamp duty was paid.

Do both sons have to pay capital gains tax from the date they acquired their 25% shares (May 2019) or from the time my parents purchased the property (1991)

Is capital gains avoidable for all parties or can it be minimised by a lawful strategic approach? If so do you have any recommendations?

If the sons earn 115k from the sale is income tax also applicable? If so how much?

Assuming my mum earns $230,000 from the sale can she gift some of this to her sons and are there tax implications to her or her sons?

The 25% shares that both sons acquired were as a gift, given this does this mean that we don’t need to treat this as an investment given we didn’t pay or receive any income?
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Most helpful response

Community Manager

Replies 0

Hi @patmin,


Thanks for your questions.


Yes your mum would be pay CGT (capital gains tax).  50% of the profit would be added to her income and would be taxed at the applicable income tax rate.


Both sons would pay tax on 50% of their profit, which is added to their other income and taxed at the applicable rate. The profit is worked out from the fathers original purchase price. It is considered that the sons have owned the property for more than 12 months therefore are entitled to the 50%discount.


CGT is not avoidable.


If the money is gifted it has no relevance on the CGT – nothing would change.


CGT is still payable on an inheritance.


Check out our page on deceased estates and CGT.

 

Thanks

 

KylieS

 

1 REPLY 1
Highlighted

Most helpful response

Community Manager

Replies 0

Hi @patmin,


Thanks for your questions.


Yes your mum would be pay CGT (capital gains tax).  50% of the profit would be added to her income and would be taxed at the applicable income tax rate.


Both sons would pay tax on 50% of their profit, which is added to their other income and taxed at the applicable rate. The profit is worked out from the fathers original purchase price. It is considered that the sons have owned the property for more than 12 months therefore are entitled to the 50%discount.


CGT is not avoidable.


If the money is gifted it has no relevance on the CGT – nothing would change.


CGT is still payable on an inheritance.


Check out our page on deceased estates and CGT.

 

Thanks

 

KylieS