is capital gains tax not payable if you live in the inherited property for the period of one year?

Question

when my mother passed away i was left a house that i rent out if i sold it id have to pay capital gains tax on the amount above the areed valuation.ive been told that if i moved into the dwelling and lived there for one year that tax would not be payable if i then sold it......is this true

Answer 1

If you live in the house as your only or main residence, then the last 36 months of your ownership will be exempt from Capital Gains Tax (CGT). You don't have to live there for one year, it could be less, but it must genuinely be your only or main residence for that period.

Assuming you do move in, when you later sell the house, if you've owned it for 36 months or less you won't pay any CGT. If you've owned it for more than 36 months you could have to pay CGT on the extra years, but that would be reduced by lettting relief, taper relief and your annual allowance and may actually end up with nothing to pay.

In the UK, Steven's information about living there for 3 out of the 5 years before sale is incorrect.

Answer 2

When you inherit property you get a stepped up basis. That means that at the moment you inherit you have no capital gain. If you plan on selling the property within 6 to 12 months after taking title you probably will have no capital gain unless there was an unusually large increase in the property's value during that time. After you sell the property you many do as you wish with the money. There is no time limit for reinvestment and you don't have to keep it in any special account.

Answer 3

When you inherit property, the tax basis resets to the value at the date of death. Any gain after that time is subject to the same rules as if you had purchased the property on that date for that price. Gains on your PRIMARY residence are excluded from income if you live there 3 of the 5 years proceeding the sale.