Loss on sale of land: non-qualifying sales: general rule for adjusting sale price
- makes a non-qualifying sale of another interest in land, or
within three years, exchanges any interest in land, and:
- the sale price of the non-qualifying sale, or
- the market value at the date of exchange
is more than its value on death (IHTM33100).
If the claim for relief relates to only one qualifying sale, the sale price is increased by the difference between the sale price of the non-qualifying interest and its value on death.
If there is more than one qualifying sale, the excess must be apportioned between the qualifying sales according to their respective losses (or gains) using the ‘appropriate fraction’.
The appropriate fraction is calculated as follows
- Calculate the difference between the value of the qualifying interest on death and its sale price (as adjusted under IHTA84/S193 to 195). This figure is the numerator.
- Divide this by the denominator. This is the aggregate of that difference and the differences for all the other qualifying interests to which the claim relates.
‘Treetops’ and ‘The Pines’ were sold by qualifying sales, but ‘The Barn’ was sold by a non-qualifying sale.
The values and prices were as follows
|Property||Value on death (a)||Sale price (b)||Difference||Apportioned gain of The Barns (c)||Adjusted sale price (b+c)|
The gain on the non-qualifying sale is £2,000. The denominator is £25,000, the total differences of the qualifying sales, whether the differences are gains or losses. The denominator is not the same as the net loss on the qualifying sales (£15,000), it does not include the £5,000 difference in the value of The Barns because The Barns is not an interest to which the claim relates. So the apportioned gains for Treetops and The Pines, shown as (c) above, are
In the above example the sale price (b) of those properties which qualify (but not those which do not) is arrived at after making any adjustments for changes in the interest or underlying land (IHTM33121), compensation received (IHTM33130), leases (IHTM33131) or valuation with, and sales without other land (IHTM33132).