| Question And Answer | |
|---|---|
| Subject: | Taxation on conversion of Private Specific Trust to Discretionary Trust |
| Category: | Income-Tax |
| Querist: | Manish |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Private Trust, Specific Trust, Taxation of Trusts |
| Date: | April 30, 2022 |
A private Specific Trust wants to convert itself into Discretionary Trust. What will be the tax impact and whether it will be assumed that on conversion private specific trust is first dissolved and thereafter discretionary trust is formed? Further, the specific trust presently has huge investments in shares of various private companies and are shown at cost price the question is whether on conversion the shares will have to be revalued and brought to tax in the hands of beneficiaries at the time of conversion and further shares are held for more than 24 months, the question is whether on the conversion of trust into discretionary trust the holding period for the working of the capital gain will change.
It would be important to see the Trust deed and the clauses therein. Further, it would be necessary to see whether the same is a revocable trust or an irrevocable trust. The settlor may not be able to dissolve the trust if the same is of irrevocable nature.