Long term capital gains

Tax queries 319 views 2 replies

Nikhil Krishna

Others

38 Points Joined July 2015

Dear Sir/s. Kindly help clarify below situation.

Y1980: A property is purchased by father .

Y2011: After father pass away, it is inherited to 4 legal heirs in Y2011.

Y2014: 3 legal heirs relinquish legally via a relinquishment deed to 4th legal heir.

Y2014: 4th legal heir decides to sell the property.

Please help in below clarifications.

Q1. Is the ownership of 4th legal heir considered as "Inherited Property" or "Relinquished property. Are they one and same in this situation?

Q2. If the 4th legal heir - now absolute owner sell this property Is the sale proceeds under this considered as LTCG. NOTE that the proprty when relinquished and sold is less than year.

Q3. One of the advisors we enquired mentioned this will qualify to Short Term Capital Gains as the selling happened less than a year. Their point of discussion was that since this came to 4th legal heir via relinquishment and selling is happening in less than a year of absolute ownership, this has to be considered as Short Term Capital Gain. Now we are confused.?

Replies (2)

Rajagopalakrishnan R

PARTNER

1434 Points Joined May 2010

Was the relinquishment by way of a gift or for consideration. If it was gift, then the entire property is long term in nature. Else if it was consideration then 1/4th is long term and 3/4th is short term

Nikhil Krishna

Others

38 Points Joined July 2015

Dear Sir. Many Thanks for quick response.

It was NOT a gift deed. It was relinquishment by way of relinquishment deed with NO consideration for other three (it is worked out on personal basis and not mentioned that this is gift or any amount anywhere in deed). In that case will the entire property and sale proceeds amount be Long Term ?