CG66623 - Capital Gains Tax and Gifts: Exemptions and No Gain/No Loss: Charity Becoming Absolutely Entitled to Trust Assets

When someone becomes absolutely entitled to trust assets TCGA92/S71(1) treats the trustees as having disposed of, and reacquired, the assets as bare trustees at their market value. See +. If the person who becomes absolutely entitled is a charity TCGA92/S257(3) treats the trustees as having disposed of and reacquired the assets as bare trustees for an amount which gives them neither a gain nor a loss. If only some proportion of the assets is held for a charity you apply a no gain/no loss result to a corresponding proportion of each of the assets.

There are two exceptions to this rule:

  • TCGA92/S71 applies because of the death of the life tenant (see +). TCGA92/S257(3) preserves the operation of TCGA92/S73. This means the trustees are treated as disposing of the asset at market value but without accruing a chargeable gain. This will give the charity a market value acquisition cost if it is liable to Capital Gains Tax when it disposes of the asset.
  • Consideration has been given for the charity바카라 사이트™s acquisition of the interest. This condition is aimed at various possible avoidance devices concealing what is really the sale of an interest under a settlement.

Examples

  1. Jack creates a discretionary settlement in favour of his grandchildren with a charity named as the residuary beneficiary. TCGA92/257(3) applies. When the last grandchild dies the trustees of Jack바카라 사이트™s settlement are treated as having sold and reacquired the trust assets as bare trustees for the charity at no gain/no loss.
  2. Jack creates a settlement giving his brother a life interest with a charity named as the residuary beneficiary. TCGA92/S71 applies on the brother바카라 사이트™s death and the trustees are treated as having disposed of, and reacquired, the trust assets at their market value at the date of death. TCGA92/S73(1)(a) provides that the disposal does not give rise to a chargeable gain. TCGA92/S257(3) therefore does not apply.
  3. Jack creates a settlement giving his brother a life interest with a charity named as the residuary beneficiary. The brother surrenders the life interest to the charity which then terminates the trust. The brother바카라 사이트™s disposal of the life interest is relieved by TCGA92/S76 (see CG38002). TCGA92/S257(3) applies to the termination of the trust and the trustees are treated as if they sold and reacquired the trust assets as bare trustees for the charity at no gain/no loss.