Capital Gains Tax - inherited property?

Question

My dad has recently inherited a property. The property he currently lives in is privately rented and he doesn't want to move into the inherited property as it is too small for him. He is considering selling or renting out the property but he is not sure about any capital gains tax liability? Although the inherited property won't be his 'main residence' as he won't be living there, it will be the only property that he owns. From the HMRC website I understand this to mean that he would be liable to CGT if the inherited property is sold as he hasn't lived there - is this correct?

Thanks in advance xx

Answer 1

Owning a property is irrelevant for the purposes of 'main residence'.  If he has only just inherited the property and sells it now there will not be an CGT to pay as the value will not have risen.   If he rents it out and the value increases then he is potentially liable to CGT in the future when he sells although depending on the increase in value this may be negated by his CGT allowance.

Answer 2

His basis in the property is the property value at time of death. If he did not have it appraised, it is a good idea to do that.  If he does not have appraisal, then they will go with the  value used for property tax.  That value is frequently low, so that is why you need to check it right away.

There will be capital gains tax if he sells it for more that the value at time of inheritance.  If he has depreciated the property for taxes, then there will also be a recapture of depreciation.  That is taxed as ordinary income.

(This is US tax law.  Where is the property/)