| Question And Answer | |
|---|---|
| Subject: | tax implications on a retiring partner and partnership firm which has immovable property without having done revaluation or fair market valuation |
| Category: | Income-Tax |
| Querist: | NIKHIL KANTILAL MODI |
| Answered by: | Law Intern |
| Tags: | partnership firm |
| Date: | February 24, 2025 |
what are the tax implications on a retiring partner and the partnership firm when a partner retires from a firm having fixed assets (without revaluation of the fixed assets i.e. land or immovable property or without fair market value of the fixed assets)?
The implication on the retiring Partner is that he or she will faces capital gains tax (LTCG/STCG) on the excess of consideration over their capital account, calculated at book value. No revaluation means a potentially lower payout and gain, but also less economic recognition of asset appreciation.
As regards the Partnership Firm, there is no tax liability unless fixed assets are distributed. The lack of revaluation defers tax on appreciation, benefiting the firm’s cash flow.
Disclaimer: This article is only for general information and is not intended to provide legal advice. Readers desiring legal advice should consult with an experienced professional to understand the current law and how it may apply to the facts of their case. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this article nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org