GIFT OF CAPITAL OF PROPRIETARY CONCERN TO DAUGHTER

[RAKESH SHARMA]

'A' is running a proprietorship concern in the name of 'AM Ents' and the business data includes debtors,creditors,inventory ,capital etc.

'A ' sold the inventory of 1 Cr to a partnership firm 'QR Ents' in which her daughter is a partner so that her daughter can show her capital in the firm received from his father as an inventory sold to its firm.

What are the remedies available in such a case so that his daughter can show her capital in the firm

Please advise.

AI Summary

Proprietorship owner considers gifting assets to daughter for tax benefits or selling inventory to her firm. A proprietorship owner, 'A,' intends to transfer assets to his daughter, a partner in 'QR Ents,' so she can reflect it as her capital in the firm. The options include gifting 1 crore or transferring inventory of equivalent value. Gifts to a daughter are tax-exempt. If inventory is sold to 'QR Ents,' it becomes a firm asset, not individual capital, making 'A' a creditor. If sold at cost, there's no profit; if at a profit, tax is due. Reversing the sale and gifting the inventory or assigning the debt to the daughter through a gift deed are suggested solutions.