LTCG Experts
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 November 2009
A B C D are co owner of a property(1989), and also relatives B C D relinquished their rights in favour of A, and A sold the property(2009) immediately, How the capital gain will be calculated and in whose hands?
27 November 2009
On the date of relinquishment B, C, D will be attracted with capital gains, the valuation should be cosidered is the market value.
And on the date of sale A's own share 1989 valuation, and BCD relinquishment 2009 acquisition value and the sales value should be taken into account for calculating capital gains in the hands of A.
And on the date of sale A's own share 1989 valuation, and BCD relinquishment 2009 acquisition value and the sales value should be taken into account for calculating capital gains in the hands of A.
27 November 2009
agree
Querist : Anonymous
Querist :
Anonymous
(Querist)
30 November 2009
Dear Ca. B.Srinivasulu,
sir then in A's hand his share will be LTCG and relinquished share will be STCG or the whole will be LTCG?
sir then in A's hand his share will be LTCG and relinquished share will be STCG or the whole will be LTCG?
03 August 2024
In a scenario where co-owners of a property relinquish their rights and one of the co-owners sells the property immediately after the relinquishment, the calculation of Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG) will depend on the specifics of the transaction and the holding period. Here’s how you can approach this situation:
### **Scenario Overview:**
- **Property Purchased**: 1989
- **Relinquishment of Rights**: B, C, and D relinquish their rights in favor of A.
- **Sale of Property**: 2009
### **Capital Gains Calculation:**
1. **Holding Period for A**:
- A’s holding period will be considered from the year when A acquired the entire property. Since A acquired the property through relinquishment in 2009 and sold it in 2009, A’s holding period for the property is less than one year. This means A’s share of the capital gain will be considered as Short-Term Capital Gain (STCG).
2. **Holding Period for B, C, and D**:
- B, C, and D had held the property from 1989 to 2009. Since they held the property for more than one year, any gain on their relinquished shares would be Long-Term Capital Gain (LTCG) as of 2009.
### **Capital Gains Calculation for Each Co-Owner:**
1. **For A (Post-Relinquishment Holding)**:
- Since A sold the property in the same year as the relinquishment, A's capital gain on the entire property will be treated as STCG because the holding period post-relinquishment is less than one year.
2. **For B, C, and D (Relinquished Share)**:
- Each of B, C, and D will be taxed on their respective share of the LTCG. The gains on their relinquished shares will be long-term since they held the property from 1989 to 2009.
### **How to Calculate:**
- **Calculate the Total LTCG**: Determine the total capital gain by subtracting the indexed cost of acquisition (or actual cost, as per provisions) from the sale proceeds.
- **Allocate LTCG to B, C, and D**:
- Calculate LTCG based on their respective shares and holding period.
- **Allocate STCG to A**:
- Since A’s holding period is less than one year from the date of relinquishment to the sale, A’s portion of the gain is STCG.
### **Summary:**
- **A**: Will be taxed on STCG since A held the property for less than a year after the relinquishment.
- **B, C, and D**: Will be taxed on LTCG for their respective shares that were relinquished, as they held the property for more than one year before relinquishing their rights.
### **Steps to Ensure Compliance:**
1. **Determine the Market Value at Relinquishment**: This will help in calculating the gains for B, C, and D.
2. **Calculate the STCG and LTCG Separately**: Based on the holding periods and the sale proceeds.
3. **Consult a Tax Professional**: For accurate calculation and to ensure compliance with tax laws and regulations.
This approach ensures that the tax implications for each party are properly accounted for based on their respective holding periods and the nature of the gains.
### **Scenario Overview:**
- **Property Purchased**: 1989
- **Relinquishment of Rights**: B, C, and D relinquish their rights in favor of A.
- **Sale of Property**: 2009
### **Capital Gains Calculation:**
1. **Holding Period for A**:
- A’s holding period will be considered from the year when A acquired the entire property. Since A acquired the property through relinquishment in 2009 and sold it in 2009, A’s holding period for the property is less than one year. This means A’s share of the capital gain will be considered as Short-Term Capital Gain (STCG).
2. **Holding Period for B, C, and D**:
- B, C, and D had held the property from 1989 to 2009. Since they held the property for more than one year, any gain on their relinquished shares would be Long-Term Capital Gain (LTCG) as of 2009.
### **Capital Gains Calculation for Each Co-Owner:**
1. **For A (Post-Relinquishment Holding)**:
- Since A sold the property in the same year as the relinquishment, A's capital gain on the entire property will be treated as STCG because the holding period post-relinquishment is less than one year.
2. **For B, C, and D (Relinquished Share)**:
- Each of B, C, and D will be taxed on their respective share of the LTCG. The gains on their relinquished shares will be long-term since they held the property from 1989 to 2009.
### **How to Calculate:**
- **Calculate the Total LTCG**: Determine the total capital gain by subtracting the indexed cost of acquisition (or actual cost, as per provisions) from the sale proceeds.
- **Allocate LTCG to B, C, and D**:
- Calculate LTCG based on their respective shares and holding period.
- **Allocate STCG to A**:
- Since A’s holding period is less than one year from the date of relinquishment to the sale, A’s portion of the gain is STCG.
### **Summary:**
- **A**: Will be taxed on STCG since A held the property for less than a year after the relinquishment.
- **B, C, and D**: Will be taxed on LTCG for their respective shares that were relinquished, as they held the property for more than one year before relinquishing their rights.
### **Steps to Ensure Compliance:**
1. **Determine the Market Value at Relinquishment**: This will help in calculating the gains for B, C, and D.
2. **Calculate the STCG and LTCG Separately**: Based on the holding periods and the sale proceeds.
3. **Consult a Tax Professional**: For accurate calculation and to ensure compliance with tax laws and regulations.
This approach ensures that the tax implications for each party are properly accounted for based on their respective holding periods and the nature of the gains.
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