A lavish Las Vegas property owned by alleged Ponzi schemer Greg Martel will be sold for $5.1 million US this week after a U.S. court authorized the deal and agreements settling opposing claims on the home.
But once the dust settles on the sale of the seven-bedroom, eight-bathroom, 9,221-square-foot house, it’s unlikely any of the money recovered will reach the many hundreds of people who lost money investing with Martel.
For one, the property has an outstanding mortgage of about $4 million US, according to receiver and trustee PricewaterhouseCoopers (PwC).
In addition, PwC needs to pay back an investor who funded its legal efforts in the United States to the tune of $400,000 Cdn. PwC also says it needs to pay itself after racking up a bill of over $1 million Cdn investigating Martel, according to documents posted on its website.
Martel is the disgraced Victoria, B.C., mortgage broker at the centre of an alleged financial fraud run through his company, Shop Your Own Mortgage (SYOM), also known as My Mortgage Auction Corp.
According to the latest estimate, he owes 1,300 investors $312 million Cdn, in what an expert intimate with the details of the case said has all the hallmarks of a Ponzi scheme.
SYOM collapsed last year amid a flurry of lawsuits filed by investors. The claims were consolidated by the court under a receivership order in May of 2023 and PwC was appointed receiver with the duty to recover money and assets of Martel and his company to pay back jilted investors.
The Las Vegas property is one such asset — and a contentious one at that — requiring many months of legal machinations on both sides of the border.
In order to seize and sell the Las Vegas property, an agreement had to be reached between PwC and a group of creditors led by American Daniel Castellini, who lost $2 million investing with Martel.
Tracked down in Thailand
A sworn declaration submitted in U.S. court by PwC senior vice-president Neil Bunker detailed how in September of last year, a private investigator hired by Castellini tracked Martel down in Thailand where he was hiding out.
The investigator arranged for Thai authorities to detain Martel on an expired tourist visa, before cutting a deal that saw Martel transfer title of the Las Vegas property to Castellini, along with two Teslas and a “substantial” amount of cash.
According to Bunker, the deed for the Las Vegas property was secured through audio-visual communication on Aug. 29, 2023. Martel was released from Thai custody the next day and ordered to leave the country.
After learning that Martel had transferred the Las Vegas property to Castellini, PwC successfully argued in U.S. court that the powers previously granted in Canadian court gave PwC primary authority to recover and sell the home.
PwC then struck a deal with Castellini that says once PwC completes the sale of the Las Vegas property, Castellini will be paid $28,000 from the proceeds. The reimbursement is for “certain expenses [Castellini] represents were incurred investigating Martel and his business dealing,” according to court documents.
Court documents also say Castellini has agreed to co-operate with PwC by sharing the name of the investigator who went to Thailand, as well as all reports and information the investigator provided.
After leaving Thailand, Martel went to Dubai, according to PwC. His whereabouts are unknown.
The Las Vegas property is being sold to Kirk and Janette Mendez, who had also filed a claim on the home.
The couple signed a lease agreement with Martel in February of last year, about the time SYOM was blowing up. They agreed to pay $27,500 per month, with an option to buy the home outright for $5.1 million in February of 2024.
The Mendezes paid Martel for the year upfront but court documents say it appears he absconded with all the money.
CBC has reached out to Castellini and the Mendezes for comment.
According to PwC, two other properties owned by Martel were sold late last year as part of the asset recovery effort.
A heavily mortgaged house in Victoria sold for $2.47 million in December, resulting in $109,606 in net equity for the creditor pot. And an Ontario property Martel co-owned with a former spouse sold for $310,000, resulting in $82,698 in net equity recovered.
Last September, Martel was found guilty of contempt of court and warrants for his arrest have been issued in Canada and the U.S.
Largest Ponzi fraud in Canadian history?
Martel and SYOM were supposedly in the business of pooling investor money to provide short-term bridge loans to real estate developers, but so far investigators have found no evidence that any bridge loans were ever extended.
Martel attracted investors by promising sky-high rates of return, sometimes as high as 100 per cent on an annualized basis.
Bunker said previously that the absence of company records point to the concept that SYOM was a Ponzi scheme orchestrated by Martel.
If true, it would put him in the running for perpetrating Canada’s largest Ponzi fraud ever.
In 2017, two Alberta men were found guilty of fraud and theft after bilking investors out of a combined total of between $100 million and $400 million. At the time the RCMP characterized the crime as the largest Ponzi scheme in Canadian history.
A Ponzi scheme is where people hand over money believing it will be used in legitimate investments, often with the promise of large returns. Behind the scenes, the money actually goes toward paying earlier investors who have also been promised profits.
Do I pay capital gains tax on property?
If you sell a property in the UK, you might need to pay capital gains tax (CGT) on the profits you make.
You generally won’t need to pay the tax when selling your main home.
However, you will usually face a CGT bill when selling a buy-to-let property or second home. You may also need to pay CGT if your home is partly used as a business premises, or if you lease out part of your property.
Video: capital gains tax on property
The video shows how capital gains tax works when you sell a property that’s not your main home.
CGT rates on property
In the UK, you pay higher rates of CGT on property than other assets.
Basic-rate taxpayers pay 18% on gains they make when selling property, while higher and additional-rate taxpayers pay 28%.
With other assets, such as shares, the basic-rate of CGT is 10%, and the higher-rate is 20%.
Bear in mind that any capital gains will be added to your other income sources when working out which income tax bracket you’ll fall into for the year, and therefore might push you into a higher bracket.
All taxpayers have an annual CGT allowance, meaning they can earn a certain amount tax-free.
In 2023-24 you can make tax-free capital gains of up to £6,000 – down from £12,300 in 2022-23. The allowance is due to be cut further in 2024-25, so you can earn just £3,000 tax-free.
Couples who jointly own assets can combine this allowance, potentially allowing a gain of £12,000 without paying any tax.
You’re not allowed to carry over any unused CGT allowance into the next tax year – so if you don’t use it, you’ll lose it.
You can find out more in our guide to capital gains tax rates and allowances.
How much CGT will I pay?
As the name suggests, CGT is only charged on the gains you make (the profit), rather than the full amount you sell the property for.
To work out your gain, you can deduct the amount you originally paid for the property from the sales price.
You can also deduct any legitimate costs involved with buying and selling the property. This includes things like broker fees, stamp duty, and some improvements to the property that were made while you owned it.
You can also offset losses you’ve made when selling other assets. For instance, if you own several properties and make, say, a £50,000 loss when selling one of them, you can use that against the gains you make from another property and therefore reduce your overall CGT bill.
You should claim any losses on your self-assessment tax return, or by calling HMRC. You can claim losses up to four years after they were incurred.
For any taxable gains above the tax-free allowance of £6,000 in 2023-24 (£12,300 in 2022-23), you’ll pay the CGT property rates.
- Do your 2022-23 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.
When is capital gains tax on property due?
For UK properties sold on or after 27 October 2021, you must pay the tax owed within 60 days of the completion of the sale or disposal.
You’ll do this by submitting a ‘residential property return’ and making a payment on account.
For property sales made between 6 April 2020 and 26 October 2021, the window to pay your CGT bill was 30 days.
What can I deduct from my taxable gain?
You’re allowed to deduct certain costs from your gain, if they’re involved with buying and selling the property. These include:
- solicitor and estate agent fees
- stamp duty when buying the property.
Costs involved with improving the property, such as paying for an extension, can also be taken into account when working out your taxable gain.
However, you’re not allowed to deduct costs involved with the upkeep of a property. You’re not allowed to deduct mortgage interest either (though that can reduce the tax you pay on rental income).
Example of selling a second home
Someone is selling a second home in England in 2023-24 for £220,000 after buying it 10 years ago for £120,000.
Their capital gain is the increase in the property value, which is £100,000.
However, they spent £5,000 on solicitor fees and estate agent fees when selling the property, which reduces their gain to £95,000.
They have no other gains or losses, so they can simply use their £6,000 CGT allowance – reducing the taxable part of their gain to £89,000.
The rate of CGT they’ll pay depends on their other income. In this case, let’s say it’s £25,000.
This means they’d pay 18% basic-rate CGT on £25,270 of their gain (taking them up to the threshold of £50,270) – coming in at £4,548.60.
They’d have to pay the higher rate of 28% on the remaining £63,730, which is £17,844.40.
Altogether, the CGT bill would be £22,393.
Capital gains tax on your main home
In most cases, you won’t need to pay CGT when selling the property you live in, because you will be entitled to ‘private residence relief’.
You won’t need to pay CGT for the time a property was your main residence, plus the past nine months of ownership (even if you weren’t living in the property during those nine months).
People with a disability, or those who move into a care home, can claim for up to the past 36 months of ownership.
That said, you may have a capital gains tax bill to pay if you:
- develop your home, for example, by converting part of it into flats
- sell part of your garden, and your total plot – including the area you’re selling – is more than half a hectare (1.2 acres)
- use part of your home exclusively for business
- let out all or part of your home – this doesn’t include having a single lodger if you are living in the property, too
- moved out of your property nine months or more ago – to move into a partner’s home, for example
- bought a home for the purpose of renovating it and selling it on.
Which property is my main home?
If you use more than one home, you can nominate which will be tax-free for CGT purposes. It doesn’t have to be the one where you live most of the time.
Generally, it makes sense to nominate the property that’s you expect to make the largest gain when you come to sell it. You have two years from when you get a new home to make the nomination.
Married couples and civil partners can have only one main home between them, but unmarried couples can each nominate a different home.
Remember, you don’t get tax relief if you bought your home just to sell it on and make a gain.
How does letting relief work with CGT?
If you have let out either all or part of a property, a proportion of any gain when you sell it could be taxable. But if you used to live in the property (or still did at the time of selling), you might be able to claim letting relief, which will reduce your capital gains tax bill.
Letting relief doesn’t apply to buy-to-let investors who let out their properties and never live in them, and it’s now only available for people who have been in shared occupancy with their tenant/tenants. You can also only claim letting relief on the proportion of the property being let, for the period of time it was let out for.
The amount of letting relief you can claim will be the lowest of either:
- the gain you receive from the letting proportion of the home, or
- the amount of private residence relief you can claim, or
- £40,000.
Note that you can’t claim private residence relief and letting relief for the same period. So, if you are letting the property out when you sell it, the past nine months of ownership will qualify for private residence relief rather than letting relief.
The exact amount of private residence relief and letting relief you can get depends on the amount you sell the home for.
How letting relief works in 2023-24
Letting relief can feel confusing. This example illustrates how to work out capital gains tax when you sell a home you have been letting out.
John has owned a property for 20 years and has decided to sell up. He has no spouse or civil partner.
He bought the property for £200,000, but sold it for £300,000, giving him a £100,000 profit, or gain. We’ve assumed this gain has no allowable costs to be deducted.
During the 20 years (or 240 months) John:
- Lived in the property for 12 years (144 months)
- He then used it as a second home for four years (48 months)
- He then let it out to a tenant for four years, while living at the property (48 months) up to the point of selling the property. The tenant occupied an area equivalent to 25% of the home.
Here’s how John works out his CGT bill for a sale in 2023-24.
The example amount that John has to pay as a basic-rate taxpayer is made on the assumption that John’s gain does not push his overall income into the higher-rate tax band.
CGT on gifted and inherited homes
Your parents or relatives may want to leave you their home in their will. When they pass away, you’ll inherit the property at its market value at the time of death.
There is no CGT payable on death, but the value of the home will be included in the person’s estate. An estate is defined as being the total of someone’s assets and property, minus any debts and funeral expenses.
Depending on the value of the person’s estate, inheritance tax may be payable on the property.
If you then sell the property without having made it your own home, there could be CGT to pay.
The tax you pay will be based on the property’s value when you sell it, compared with its value on the date of death. If the value has increased, you’ll have made a taxable gain. As with any other property gains, you’re able to deduct any associated selling costs.
If you’re given the home while the owner is still alive and living in it, this is called a ‘gift with reservation’.
Essentially, this means the value of the property will still be included in inheritance tax calculations when the gift giver passes away.
However, it may change things in terms of CGT. If you sell the property, the CGT you owe will be based on the increase in value between the date you were given the property – not the date of their death – and the date you sell it.
This is the case even though there may also be inheritance tax to pay on the home at the time of death.
Example of CGT on inherited homes
These tables explain what would happen if John inherited his father’s home.
The first table explains what would happen if it was gifted on death.
The second table explains what would happen if John was given the home 10 years before his father’s death, and his father continued to live there until he died.
With a taxable gain of £56,000, the rate of CGT depends on the rest of John’s income. He’d have to pay 18% if it made up some of his basic-rate threshold up to £50,270. Anything above that would be charged at the higher rate of 28%.
If John already received other income of more than £50,270, the most CGT he could expect to pay is £15,680, which is 28% of the full £56,000.
Which other taxes may be due on UK property?
CGT is just one of the taxes that is levied on properties in the UK, charged when you come to sell it.
When you buy a home, you will likely need to pay stamp duty on the purchase price. The amount depends on whether the property is your main home or a second home or buy to let investment.
Residents also need to pay council tax, with the amount depending on the property size, location, and a few other factors.
If you’re letting out a property, you’ll probably need to pay income tax on the rent you receive.
And, if you leave a property to someone after you pass away, inheritance tax may be charged on some of its value.