Divorce, cash, house

[blue max]

Best title I could come up with

My brother is just getting divorced after 25 years of marriage.

They owned a house together and six years ago, he moved out and bought his own house (his house is worth about half as much). After getting back together for about six months, he moved back out and we are now at the point where he is nearly divorced.

They have agreed to split assets 50:50 and the net result is that she owes him some cash which is mainly for the difference in value of the two properties. He was happy to retain equity, but she wants to buy him out.

I can't figure out if he should be paying any tax on that amount. Surely if that was not his main residence, it is an investment property. Or is it just on the rise in value during those six years?

Anyone got any thoughts?

 

[SteveCritten]

Just to get this clear, she is keeping the original residence and he is keeping his and she is just giving him some cash in order to pay the difference. As this was his original main residence then I believe he would be exempt from capital gains tax, plus as you say if anything prices have stayed stable in the last 6 years so could argue there has been no gain in that time.
If this is being dealt through a solicitor they may be able to advise more.

 

[blue max]

Thanks Steve. I think I agree with your thinking. I was thinking along the lines of if he was to sell, as a second residence, it must be an investment property, or his current home must be. He surely can't have both properties as his main residence.

I don't know, it has many ways to view it. As you say, he needs to get legal advice. I was just curious myself.

 

[Epicurus]

You're actually allowed 2 principal residences anyway, so he doesn't need to worry about it.

 

[blue max]

You're actually allowed 2 principal residences anyway, so he doesn't need to worry about it.

Well, you learn something new every day

Abbey National wouldn't give us a mortgage to buy the flat above us 'cos it was an investment property 'til we knocked through. Never did and it was £67k at the time (had been repossessed) and now worth well in excess of £450k. Such is life!

 

[Epicurus]

Yeah I only found out last year myself unfortunately.

 

[Bugbait]

You're actually allowed 2 principal residences anyway, so he doesn't need to worry about it.

With the caveat being that neither one is rented out I believe so you're right, no capital gains tax should be applicable here.

 

[blue max]

With the caveat being that neither one is rented out I believe so you're right, no capital gains tax should be applicable here.

Interesting. So if you bought a house for a child to live in whilst at university, it would not be considered an investment property, but effectively your second home and not be liable for any tax at all. Is that the case?

It does offer us all sorts of possibilities (if you had the cash of course!).

 

[Elrond]

This should explain it: HM Revenue & Customs: