TREATMENT OF ESTATE PROPERTIES AFTER DEATH OF ASSESSEE

[CABIJENDERKUMAR BANSAL]

Dear All

Assessee was having business of sale purchase of land and building, he was expired in 2014.After that an Estate was formed by the surviving members of the deceased as an AOP. Estate was formed because settlement was not done between family members.

From that year onwards, estate is doing sale purchase of land and building and simultaneously transferring some stock to all the members in equal ratio at cost, for which we are doing journal entry as follows:

Capital A/c Dr.

To transfer (distribution of asset) credited in trading account to adjust stock

Now first query is : Is this treatment correct or any other treatment should be made ?

second query: Whether this transfer value will be considered for calculation of turnover for Tax audit purpose?

Third query: In the hands of transferee, it will be stock in trade or capital asset considering that they are not into business of sale purchase of immovable properties.?

Fourth query: can the estate continue its business activities(sale as well as purchase with third parties) or it should only distribute existing stock to its members ?

Thanks

Deepak kakkar

[DR.MARIAPPAN GOVINDARAJAN]

You may better to consult a Chartered Accountant in this regard.

[Ganeshan Kalyani]

The query needs much study and also the stake is high. Hence, as my collegue opined you may seek advise from a practising consultant. You may find experts from TMI itself. Thanks.

[KASTURI SETHI]

Rightly advised by both experts.

AI Summary

Estate as association of persons: asset transfers on distribution may affect turnover inclusion and asset character for transferees. An estate operated as an Estate as AOP continued trading in immovable property and distributed stock to members at cost via Capital Account debits and Trading Account credits. Key operative questions: correctness of that accounting treatment; inclusion of transfer value in turnover for tax-audit thresholds; characterization of received assets as stock-in-trade or capital assets for transferees not in the trade; and whether the estate may continue trading with third parties versus only distributing existing stock. Advisers recommended consulting a chartered accountant.