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Partnership cessation accounts on death of a partner

Partnership cessation accounts on death of a...

Hi

I'm after some general feedback really if anyone wod care to share their thoughts?!

Husband & wife partnership draw their accounts to 30th April 2012. Husband dies in December 2011 & wife basically continues business for a few months, winding it down & eventually last sale is the following March.

Does partnership cease in December 2011?
Does it then transfer to a sole trader for the remaining 3-4 months?

The only real sale following the death was the sale of the remaining stock at auction.

Thanks in advance for any feedback

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04th Jan 2014 08:34

Why does it matter?

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By mhtax
04th Jan 2014 09:12

Documentation

Your first stop has to be the two legal documents: the Partnership deed and the Will.

A partnership deed should determine what happens to the husbands share of the partnership in the event of his death as it may not automatically go to the wife. If it is part of the residual estate the partnership has continued with the Executors standing in the deceased's shoes.It may also contain conditions over the distribution of the capital account such as payable over 5 years, or only on the cessation of trading by the partners.

The will is the next document which states where the assets are going. Again that may not be the wife as passing IHT free assets away from the spousal exemptions would be good planning.

If you have neither then yes the partnership finished on date of death and wife was a sole trader for the last few months.

The cessation of trade will depend on the type of stock sold, and to who. If it was a clearance type sale I would also argue that trading also stopped on the date of death.

Whatever sequence of events they should have been reported on the 2011/12 return because there definitely wasn't a trade in the next tax year.

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By Conc78
04th Jan 2014 14:59

Hi 

Hi 

Thanks for the feedback

Like many partnerships, especially husband & wife ones, there was never an official partnership agreement drawn up.

The will was a simple one really...everything went to the wife.

In terms of assets...the only real item was a £8k pickup that was bought shortly before the husband's death.

The sale at auction was basically a sale of all stock that was remaining. To be fair, it wasn't "given away"...items were withdrawn that didn't fetch their reserve etc  the auction date was in April 2012, so effectively it's 2012/13. I'm told although there wasn't a lot left following the auction. The business also carried out services which were carried out & managed by the husband which obviously stopped following his death.

I've just spoken to previous accountants again who did 2011/12 & they've forwarded on partnership return (as initially only sent me 'short' one) & it does indeed say in box 3.116 that partnership ceased in Dec-11 & wife carried on as sole trader in own name until business ceased in 2012/13 & husband's individual SA Return will shown an adjustment for his final basis period.

The retention of the pickup after cessation of sole trader it looks will be my only remaining concern?

Thanks

 

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