Just asking for a friend..
Around 15 years ago, it was suggested to my friend by his accountant that he record his jointly owned rental properties under a 'partnership' tax number solely as a matter of simplicity for tax purposes. This way the gross returns of taxable profit could be allocated all together and distributed evenly to him and his wife.
The accountant registered for a partnership tax number. The partnership was called B & L. Smith (pseudonym)
Each successive year the properties were recorded as assets under the partnership number and the gross profits were distributed evenly to him and his wife to then pay tax separately. No legal transfers of the title deeds were made of any kind to the partnership. It was always understood that the properties belonged jointly to him and his wife not to the partnership itself . The title deeds of the properties did not mention the word partnership.
Friend and his wife went onto purchase 2 more rental properties, making a total of 6 over the 30 years of their relationship. In essence it was a husband and wife relationship making the purchases.
The couple split up.
Originally after splitting the wife wanted only 1 property sold and their was no mention of any partnership.
My friend suggested a 50/50 split based on the premise of mutually agreed values, each person take 3 properties, but the lawyer acting on behalf of his ex wife then announced the partnership hereby dissolved and all 6 properties to be sold - her lawyer saying that the properties are regarded as belonging to the partnership itself and therefore by dissolving the partnership the assets would come under 'partnership law' and a forced sale can be sought by either party . The ex wife wants all 6 properties to be sold.
Friend has replied that even though the partnership recorded the properties as assets they did not in essence belong to the partnership and instead belonged to the joint owners, being him and his wife.
Surely the lawyer is incorrect? Their was never any transfer of assets recorded into the partnership and the sole intention of the partnership was for simplicity of tax as advised by the accountant at the time.
Thoughts?
Around 15 years ago, it was suggested to my friend by his accountant that he record his jointly owned rental properties under a 'partnership' tax number solely as a matter of simplicity for tax purposes. This way the gross returns of taxable profit could be allocated all together and distributed evenly to him and his wife.
The accountant registered for a partnership tax number. The partnership was called B & L. Smith (pseudonym)
Each successive year the properties were recorded as assets under the partnership number and the gross profits were distributed evenly to him and his wife to then pay tax separately. No legal transfers of the title deeds were made of any kind to the partnership. It was always understood that the properties belonged jointly to him and his wife not to the partnership itself . The title deeds of the properties did not mention the word partnership.
Friend and his wife went onto purchase 2 more rental properties, making a total of 6 over the 30 years of their relationship. In essence it was a husband and wife relationship making the purchases.
The couple split up.
Originally after splitting the wife wanted only 1 property sold and their was no mention of any partnership.
My friend suggested a 50/50 split based on the premise of mutually agreed values, each person take 3 properties, but the lawyer acting on behalf of his ex wife then announced the partnership hereby dissolved and all 6 properties to be sold - her lawyer saying that the properties are regarded as belonging to the partnership itself and therefore by dissolving the partnership the assets would come under 'partnership law' and a forced sale can be sought by either party . The ex wife wants all 6 properties to be sold.
Friend has replied that even though the partnership recorded the properties as assets they did not in essence belong to the partnership and instead belonged to the joint owners, being him and his wife.
Surely the lawyer is incorrect? Their was never any transfer of assets recorded into the partnership and the sole intention of the partnership was for simplicity of tax as advised by the accountant at the time.
Thoughts?
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