Gray v Inland Revenue Commissioners: CA 24 Feb 1994

Partnership interests in a tenanted freehold estate can be valued together. The court considered the ‘statutory hypothetical sale’ when valuing property for Inheritance Tax purposes: ‘The property must be assumed to have been capable of sale in the open market, even if in fact it was inherently unassignable or held subject to restrictions on sale. The question is what a purchaser in the open market would have paid to enjoy whatever rights attached to the property at the relevant date (see IRC -v- Crossman [1937] AC 26). Furthermore, the hypothesis must be applied to the property as it actually existed and not to some other property, even if in real life a vendor would have been likely to make some changes or improvements before putting it on the market (see Duke of Buccleuch v IRC [1967] 1 AC 506 at 525). To this extent, but only to this extent, the express terms of the statute may introduce an element of artificiality into the hypothesis. In all other respects, the theme which runs through the authorities is that one assumes that the hypothetical vendor and purchaser did whatever reasonable people buying and selling such property would be likely to have done in real life.
Times 24-Feb-1994, [1994] STC 360
Inheritance Taxes Act 1974
England and Wales
Citing:
CitedInland Revenue Commissioners v Crossman HL 1937
For a valuation for estate taxes, the value is what a purchaser in the open market would have paid to enjoy whatever rights attached to the property at the relevant date.
Lord Russell of Killowen said that a share is the interest of a . .
CitedDuke of Buccleuch v Inland Revenue Commissioners HL 1967
When a valuation was to be attributed to a property the test must be applied to the property as it actually existed and not to some other property, even if in real life a vendor would have been likely to make some changes or improvements before . .

Cited by:
CitedRyde International Plc v London Regional Transport CA 5-Mar-2004
The landowner had developed land which was then made the subject of compulsory purchase. The court was asked how the compensation was to be calculated. The landowner expected to sell the development as a whole. The respondent argued that the profit . .

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Updated: 09 April 2021; Ref: scu.80993