In: Finance
Mr. John Jones a pensioner has four sons and four plots of land. Mr. Jones is giving each son one plot in equal shares however, he is retaining life interest on the lot with his youngest son. You are asked to advise Mr. Jones on the requirements for a transfer of the lots and the procedure used to acquire a change of ownership. Using suitable examples of your choice to illustrate, how do you calculate his capital gains/loss?
Ans:
Procedure of Changing ownereship for property like plots
step 1: Discussing term of requirement with new owner - tenancy type , joint or single
step 2: Attorny of real estate or Land property will prepare a deed which consists of personal details of family and members who are transferring property. and details of transferee.
step 3: Deed is reviewed and checked whether all information mentioned are accurate or not.
step 4: The deed is signed by an qualified notary public.
step 5:The deed is taken to local county's office record for kept safe and that should be followed by both parties .
Calculation of Capital Gain / Loss:
First it will be deicided short term or long term capital gain . purchase with in one year i.e short term capital gain.otgherwise long term gain
First find out full value of consideration upon seling that property to another person.
it is decided upon fair market value.
Expense transfer; cost rquire for transfer of property.
Cost of acquisition : it is required when one born cost to acquire property from other.
Cost of imporovement: Any improvement or addition made to it before.
Cost of inflation index.
Capital gain/ loss calculation:
Full value of Consideration
less expense transfer
less: cost of acquisition
less: cost of improvement
LTCG property
less : exemption
Tax on capital gain
Note : in this question sale of property period i.e one year or less or more than one year is not given.