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Capital Gains Tax on deceased inheritance property with mortgage

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JustinOz | 11 May 2016, 10:35 AM Agree 0
Sorry if this has been covered, I tried to search a couple of times and got server errors.

I have inherited a property that at the time of my fathers death was mortgaged to near or greater than the value of the property, it was my fathers place of residence for from purchase (around 1998) for a number of years, maybe 5 or so but then he moved on. He purchased the property for around 115K in QLD and subsequently refinanced a couple of times as the property increased in value so the final mortgage (paying interest only) was 290K on his death. At the time of death it was rented to a long term tenant who has since passed away, his son took over but he turned out to be a drug seller and his contribution combined with the general deterioration of the property meant that its value was estimated at below or around the mortgage value.

I have since invested around 70K in the property and it is potentially worth a little over 400K now, I am about to get the transfer of the mortgage to my name in the next couple of weeks. I had thought this would mean that my CGT would be calculated on the value at death, but my accountant assures me it will be calculated from the time my father purchased the property, and that I will not be able to claim the current mortgage as costs but only the original mortgage value (at time of purchase), this will set me back at least another 50K.

Does this advice sound correct, the cost to myself will be the mortgage 290K plus the 70K renovations, repairs etc so far... so around 360K however if for example I sold it now for 400K I would pay CGT on 215K (the 400k less the purchase price of 115k plus my costs 70k) not 40K as I expected (leaving me with a negative result if approximating at 25% of the capital gain).

Do I need a better accountant, or is this correct?

Thank you for any advice.

Justin
  • Trudi | 29 Aug 2016, 08:10 PM Agree 0
    See an accountant with all the information and paperwork you have. This is not a question to put to a forum
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