Development rights given to partnership firm
Querist : Anonymous
I have a very interesting query.
Assumptions:
1) Sally got Land gifted from parents and paid the stamp duty according to the revenue records. Let say at that time land was valued at 20 Lakhs.
2) Sally now wants to give development rights to ABC and not sell the land to a PVT LTD COMPANY ABC.
3) SALLY , JOHN and ABC PVT LTD want to develop the said land and make a hotel on the same. JOHN Is director of ABC but wants his company ABC to only give capital and take their liable share nothing more. Major work will be done by individual John which he wants to take profit personally into his account.
4) Since stamp duty valuation is always less than the actual land value. The said land if valued by a govt auth valuer the same will be valued at Rs 2 crore.
5) ABC PVT LTD will be putting in let say 2crore of capital to build the hotel.
6)Sally and JOhn will be the working partners.
7) John is also the director of ABC PVT LTD.
Questions
1) If developments rights are give and land is not sold and put inside the partnership firm will there be any capital gains arising?(As there is no sale)
2)What should be the correct profit sharing ratio for
a) Sally
b) John
c) ABC Pvt Ltd
3) Is partnership firm the best type or do you recommend another type of legal company?
.
.
Querist : Anonymous
Querist : Anonymous
01. The hotel building is owned by whom? Sally or Partnership firm or ABC Pvt Ltd? What for the Sally's land is being developed?...(I am trying to drive you at CONSIDERATION part which will automatically solve the issue of capital gain)
Querist : Anonymous
Sally's share is land which is 2crore.
ABC Pvt LTD is giving cash Rs2crore to build the hotel.
Sweat equity is John and Sally who are developing the hotel.
We need to figure out what share of the project goes to whom legally. But the land will always be in the name of Sally.
Anyway, the simple concept is the ratio has to be in proportion to the RISK associated with each of the contributory.
Querist : Anonymous
02. Who is going to be the OWNER of hotel building?
Querist : Anonymous
ABC Pvt ltd will own part of hotel but not land.
John doesn't mind just getting share in profits since his is sweat equity or even a small share of equity in the partnership.
We need to formulate the share of each party and what they can receive legally without any doubt!
Querist : Anonymous
02. Be sure in stating that ABC pvt ltd shall own a part of HOTEL. Warning is...it may tantamount to "sale of developement rights" attached to land owned by Sally....(That is why I was meticulously asking from first go.....WHO IS GOING TO OWN THE HOTEL BUILDING?????? Please be very careful in that
Your views please!
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