Getting an IHT rebate as a result of falling house prices!

In these difficult economic times, it is fair to say that there is little cheer around, notwithstanding Xmas being around the corner.

There is, however, inheritance tax relief available in those circumstances whereby inheritance tax was payable based on a property valuation as at the date of death but a sale takes place some time later at a reduced price.

The good news in these circumstances is that a rebate of inheritance tax in respect of the loss can be claimed on any loss incurred in respect of an open market sale within 4 years of the date of death (3 years in certain unusual circumstances).

For example, if a death occurred in August 2007 when the inheritance tax threshold was £300,000 and the home, of the deceased was valued at £400,000, and other cash assets equated to £50,000 then inheritance tax of £60,000 would have been payable (£450k - £300k = £150k x 40% = £60,000)

If a sale of the property is completed in December 2008 for £350,000 (a reduction of £50,000 of the date of death valuation) then the executors of the estate can claim inheritance tax relief of £20,000 (40% of £50,000).

In conclusion, losses incurred in the sale of a property are a bitter pill to swallow but if inheritance tax has been paid on the relevant property and the sale is effected within the relative period, you effectively cut the loss incurred by 40%.

Comments

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Thanks for this excellent post.....
Regards,

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