Herd Basis Election

Consequences of change in partnership

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Hi, Several years ago a farming partnership elected for the herd basis, recently one of the partners has died and therefore the remaining partners have to decide whether to make an election to continue with the herd basis. If an election is made then it would appear to be simple in that the herd costs is simply carried forward. I am unsure of the treatment if the remaining partners decide not to elect for herd basis. My thoughts are we will restate the herd to market value and presumably debit purchases with the full market value and credit the herd, this will result in a credit balance for the herd representing the untaxed gain which will be written off to the partners capital accounts. I will then increase closing stock at the year end to reflect the market value of the herd, asssuming no movements in the year, so there is a nil effect on profit for the new partnership in the year. Can anybody confirm, thanks. 

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