A residential property is owned by my wife for 5 years. In order to reduce capital gains tax, she will transfer 33% each to her son and daughter by gift deed, so that it becomes a joint ownership property. If they sell the property after a few months can each of them invest the capital gains amount in a different house and claim exemption under section 54. This way my wife can indirectly buy 3 houses with the capital gains amount, whereas normally only one house is allowed. Please inform whether this tax planning method is correct. The two main questions are:
Can each joint owner of sold property invest in a different house to get benefit under section 54? Also, after a gift deed , can the new joint owners get the benefit of long term capital gains since my wife has held it for 5 years?
CAclubindia
