preperty transfers
picked up a client in a pickle who is not happy with the work his previous accountants did
partnership client converted a hotel into 8 apartments and sold 6 of them
partnership owned the freehold and transferred this to a management company with the 2 flats unsold. both partners are directors / shareholders in the amangement company
on doing so the managment company granted leases on the 2 unsold apartments to the partners for a peppercorn lease.
no money changed hands for any of the above
we are not convinced by the treatment of the old firm and need to confirm:
1. is there a sale of the 2 apartments to the management company on freehold transfer - if so should this be in at market value?
2. is there a sale of the leasehold on the 2 apartments - again should this be included at MV?
property transfers
I think this may well depend on how the legal ownership and legal paperwork was drafted and also, of course, whether this was a trading or capital event.
it is possible that the development was set up so that the freehold would pass to a management company on completion of part or all of the sales of the individual apartments, in which case this would not be a chargeable event / disposal.
On the transfer of the leaseholds, again this will depend on the legal paperwork, as it is possible that the creation the leaseholds was just to satisfy the freehold position, and leaves the partners in the same position as previously, owning a development ready to sell.
So, without a careful examination of the paperwork and consideration of the nature of the transaction the answer is, it depends......
Mark