A retired widow has sold her old flat and has long term capital gains. She has 3 children but wants to give entire sale proceeds to the youngest son to buy a flat in his name. If she buys the new flat in her own name, she feels that elder 2 children may claim their share in flat and also she will not get loan, being a retired lady. If new flat is purchased in youngest son's name using the sale proceeds, the lady will not get exemption under Section 54 since old flat was in her name. The following options are considered:
1. New flat should be in joint name of the lady (first name) and youngest son (second name) so that she can claim exemption under Sec. 54, and she has to make a will mentioning that the flat should be given only to the youngest son. But it should be checked whether the son will get loan if his name is second;
2. In joint ownership of new flat, youngest son's name should be first so that he gets loan. But it should be clarified whether the lady will get exemption under Sec. 54 if her name is second. And also, whether she still has to make a will giving her share only to youngest son;
3. If the lady invests capital gain amount in bonds under Section 54EC, the new flat cannot be purchased, which is a requirement for the youngest son;
4. The lady can simply pay tax @ 20.60% on LTCG, but it will be a big amount and can be considered only if options 1 or 2 are totally impossible. Also, it will increase amount of loan that the youngest son has to take.
Considering the above options, I request learned members to please provide suitable guidance. Thanks in advance.
CAclubindia
