A partnership firm owns a land (the only asset that the firm has). Partners mutually agree and want to do the following (1) get sale proceeds in their accounts and not the firm's (2) pay capital gain tax individually and not via the firm How can both these be achieved?
What is the motive behind this?
Without ownership of land how can they pay tax on it?
It's not possible unless the partnership transfers the land to partner's 50%.
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Dear Sir,
Hope you are doing well !!
No, it is not possible.
It is advisable to take a phone consultation for detailed discussion.
Hi
As per law you can't do so.
This can only be done if you dissolve the partnership and distribute the assets in the partners name and then sale it.
Hello,
Not possible as partnership firm is the owner of the capital asset currently.
I hope this answer satisfies your requirements.
Regards,
CA Hunny Badlani
In response to Ms. Lakshita's suggestion: What document do the partners need to create for such dissolution and distribution as suggested and will it attract any stamp duty? Will dissolving the partnership firm attract any capital gain tax before it is sold by the partners (the partners are willing to pay their share of capital gains tax arising basically from the firm's liability but want to pay it individually as mentioned in the original question)
Dear Sir,
On dissolution/reconstitution of partnership firm, only firm is taxable on capital gain on assets distributed to Partners:
We may assist you with the entire process, proper documentation and compliances.
Hi
In case of Dissolution of Firm by mutual agreement, the following steps would be required to be followed:
1. Prepare a Dissolution Deed in which consent of all partners is there.
2. Advertisement need to be given in minimum two local news paper.
3. It will be published in the official gazette.
It would also be required to submit documents along with NIL balance sheet to the registrar of Firms.
Capital gain shall be taxable in hands of firm. Not in the hands of partner.
For detail discussion please take a phone consultation.
- In order to get proceeds into the partners account, land should be transferred from firm to partners. In such case, capital gain would be taxable in the hands of the partners. Sale consideration would be the fair market value of the property. As land is a non-depreciable asset, you can index the cost. To make it happen, it is not necessary to dissolve the firm.
