Treatment of Gifts
23.51. Where the taxpayer disposes of an asset by way of a gift or sale at less than market value, he should be deemed
to have disposed of the asset at market value and should be liable to taxation on the notional capital gain arising
from a deemed disposal at that value. Not to so treat gifts and sales at an undervalue would be to provide a means of
avoiding capital gains tax or indefinitely deferring it. There may of course be liquidity difficulties for a taxpayer
in meeting the tax arising from the gift of an asset where the notional capital gain is large. However, this would be
a factor to be taken into account by the taxpayer in deciding whether or not to make a gift and is in any case
essentially no different to the position with regard to a liability for gift duty. Though the primary liability of the
tax would be upon the donor, it may be necessary to impose a secondary liability upon the donee. It is noted that the
Budget proposals envisage that gift or sale at an undervalue will be treated for capital gains tax purposes as a
disposition at full market value. The liability of the donor for capital gains tax should be deducted from the value
of the gift in computing his liability for gift
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duty; the effect would be to give a lifetime gift
treatment comparable with that of a bequest.