Deemed transfer on reconstitution triggers entity-level capital gains and attribution to remaining assets to avoid double taxation. A deeming rule treats transfers on dissolution or reconstitution as if the specified entity transferred capital assets or stock in trade at fair market value, taxing resulting profits in the hands of the specified entity in the year the asset is received. The substituted receipt provision charges profits on amounts or assets received on reconstitution as capital gains of the specified entity and prescribes an attribution mechanism, with rule 8AB clarified to apply to assets forming part of a block so that attributed amounts reduce future consideration and adjust written down value or capital gains computation as applicable.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Deemed transfer on reconstitution triggers entity-level capital gains and attribution to remaining assets to avoid double taxation.
A deeming rule treats transfers on dissolution or reconstitution as if the specified entity transferred capital assets or stock in trade at fair market value, taxing resulting profits in the hands of the specified entity in the year the asset is received. The substituted receipt provision charges profits on amounts or assets received on reconstitution as capital gains of the specified entity and prescribes an attribution mechanism, with rule 8AB clarified to apply to assets forming part of a block so that attributed amounts reduce future consideration and adjust written down value or capital gains computation as applicable.
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