The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
Where land is sold from a deceased estate for less than the taxable amount at date of death, relief for the loss is granted by replacing the probate value with the later sale value in the calculation of inheritance tax.
In a typical case, where the only interest in land is the deceased’s residence which his executors sell to an unconnected person for less than its probate value, the claim should be straightforward. The lower sale price is substituted for the death value and following a recalculation, a tax repayment is made to the executors. The claims process is considered below.
However, the rules for claiming sale of land relief can be complex and can produce disadvantageous results where there are other sales and purchases or where the property sold has changed in some way.
Broadly, the provisions are that the ‘sale value’ will be substituted for the ‘value on the death’ and the inheritance tax position re-calculated, if the following conditions are met:
IHTA 1984, s 191
HMRC has confirmed that it will not accept a claim to substitute a higher sale price for the date of death value, even though the legislation implies that the sale price needs only to be different, rather than lower. Usually, the purpose of making such a claim would be to establish a higher base cost for capital gains tax purposes.
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