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Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3596
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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If you have a rental property (sole business so cash accounting)

Customer Question

If you have a rental property (sole business so cash accounting) and remortgage thus releasing funds, should you declare a capital gain at the time of releasing the funds? That would be the time the gain was realised or, do you declare at the time you sell and therefore dispose of the asset? What if the incremental releases were below the cap gains tax threshold every year but would in total be over the threshold in the disposal year?
Submitted: 2 years ago.
Category: Tax
Expert:  Barbara replied 2 years ago.
Welcome to Just Answer. My name is ***** ***** it will be my pleasure to assist you with your tax question today.
Capital Gains Tax can generally only be charged when there is a disposal of an asset. If you sell a property, you have made a disposal and usually, there will be Capital Gains Tax to pay.
When you re-mortgage a property, you have not actually made any disposal, as you still own the property. Therefore, even though you will have realized some of your capital, there is no Capital Gains Tax.
The following link contains excellent information which you may find helpful:
Please let me know if you require further information or clarification.
Thank you and best regards,
Customer: replied 2 years ago.
Hello Barbara, I am so sorry for the late reply. The Just Answer system created a new temporary account that I was unable to access until today. They did manage to charge me correctly and immediately however!Thank you for the information. Can I just check if a landlord moves into a rental property so that it becomes the (sole) main residence prior to selling it would he/she be charged a pro-rated CGT or would the full CGT be charged? Does it depend on the length of time it has been a main residence prior to the sale?ThanksAlex
Expert:  Barbara replied 2 years ago.
Not a problem about the delayed response. I'm not absolutely certain about what you are asking in your most recent response, but I think the following information will help. If you require further clarification, just let me know by posting here at your convenience.Private Residence Relief only comes into play if two conditions are satisfied. For the whole time the property is owned, both of the following conditions must apply:It has been your only home or main residence, andYou have used it as your home and nothing else.The final 3 years (36 months) always qualify for relief. This applies even if you weren't living there during the final 3 years. It must have been your only or main home at some point during the time that you've owned it. My points of reference are the following: Best regards,Barb
Expert:  Barbara replied 2 years ago.
Just following up with you to see if you have any other questions or concerns. If so, please come back to me here at your convenience, and I will be happy to assist you. If not, please take a moment to rate my answer since that is the only way I receive credit for answering you and alerts Just Answer to compensate me.
Best regards,