My father passed away recently without a will post which my mother, brother, sister and myself inherited a house property that my father owned earlier. Now, we want to sell this property and get the sale proceeds in mutually agreed percentages and not equally. Buyer is saying that he can only pay all 4 of us equally as it's a joint inherited property. 1) Is the buyer correct in saying that it should be paid equally at the time of sale although we've mutually agreed it to be different percentages? 2) If the buyer agrees to pay as per internal mutually agreed percentages, will there by any problem with capital gains tax assessment later for tax purposes? For ex: one of us getting lesser share will also be assessed to pay Capital gains tax assuming it was equal share. Kindly provide your opinion

Ans: Here's some information to help you navigate this situation:

Buyer's Perspective: The buyer is likely concerned about ensuring a clean title to the property. Having multiple owners with different ownership percentages can be complex for them. From their perspective, paying equally avoids future disputes or complications regarding ownership.

Your Options:

Negotiate with Buyer: You can explain your situation and try to convince the buyer to pay according to your agreed percentages. Perhaps offering an indemnity clause (where you take responsibility for any future ownership disputes) could help. A lawyer can help craft such an agreement.

Partition Deed: You can get a partition deed prepared by a lawyer. This deed will legally divide the ownership into specific percentages as agreed by all of you. This establishes clear ownership and allows the buyer to distribute the sale proceeds accordingly.

Capital Gains Tax:

Tax Implications Not Affected by Distribution: The capital gains tax is calculated based on the property's overall gain, not the individual distribution. You will each be liable for capital gains tax on your share of the property, regardless of the sale proceeds received.

Record Keeping is Key: Maintain proper records reflecting the inheritance and the agreed-upon distribution percentages. This will be crucial when filing your individual tax returns.

Recommendation: Consult a lawyer specializing in property inheritance and taxation. They can advise you on the best course of action considering your specific situation and local laws. They can also help with the partition deed and navigate the legalities of the sale with the buyer.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in