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HMRC internal manual

Capital Gains Manual

Death of person with interest in possession: examples

In 1983, a settlor settled assets having a market value of £10,000, on trustees. A claimwas made by the settlor under FA80/S79. The held-over gain was £3,000, so the trusteeswere treated as acquiring the assets for £7,000. All the assets were subject to a lifeinterest. The life tenant died in 1992 when the market value of the assets was £15,000.The assets remained settled property and Section 72(1) applied. The trustees are deemed todispose of and re-acquire the assets at £15,000, but the chargeable gain on the trustees,which would otherwise be £8,000, less indexation, is limited to the held-over gain of£3,000.