My mother has a property which was bought by my father during his lifetime. I, my brother and sister relinquished our rights in favour of our mother about 10 years back after our father's Denise
Now 1 brother wants to buy share of the 2nd brother and get the property registered in his name. Sister and Mother do not have an objection to this arrangement
To do this Mother, Sister and Brother 2 will do a relinquishment deed in father of Brother 1
And Brother 1 will transfer funds to brother 2 as his share and this will be done in the form of a GIFT by a registered Gift Deed
A) Although the money is being gifted by brother 1. Can this be construed as sale of property and this attract Capital Gains or added brother 2's income not ? Since the full transfer will be in white, the tax amount will be substantial
B) Can brother 1 take loan against this property and transfer the same to brother 2 by way of gift ?
A) The two transactions CAN happen but can also result in an audit and tax penalties/fines since it is not actually a gift but a sale. Same situation when it is registered, it could be looked at as what it is, avoidance of tax.
B) If there's a loan on the property you won't be able to transfer it without the lender's consent (which likely won't be given, unless both names are on the loan then maybe). If it's done this way there COULD be an argument that the only "value" of consideration is the difference between property value and loan amount and only that portion be subject to transfer tax.
You've mentioned capital gains tax, but forgot about the registry tax/stamp duties. If there's separate transactions that's different but two close transactions? Might be worth paying the tax/duties.
Thank You Master Warrior. This is exactly what I was looking for
But, since propertyis registered in mothers name and will be transferred to Brother 1 (though R deed is done by brother 2 and sister as well )
But gift will come from brother 2 to brother 1, doesn't that separate the 2 transactions ?
The author's response is troubling; his response suggests that he is seeking particular information without disclosing even primary information as to the complete particulars as to legal heirs. Your subsequent explanation only confuses the matters. Why should the brother who relinquishes his property gift money as well? So also, how could there be a registered gift deed of money, with no property involved?