Question

In each of the following situations explain (1) what doctrine might cause problems for the taxpayer’s planned strategy AND if the strategy would be effective. Your response may be to point out what concerns you have if the answer is not yes or no.

Christopher owns 100 acres in the woods. He is under contract to sell the 100-acre wood to a third party buyer. Before the sale closes, In each of the following situations explain (1) what doctrine might cause problems for the taxpayer’s planned strategy AND if the strategy would be effective. Your response may be to point out what concerns you have if the answer is not yes or no. Christopher plans to gift 10 acres to his friend Winnie so that Winnie will be taxed on 10% of the gain.

Answer 1

SOLUTION

According to the sale of goods act, 1930 any contract to sell things to a third party buyer is valid and must be taxable under income tax act.

According to income tax act, 1961 any gifts received from friends is exempted only upto the worth of Rs.50000, if the value is gift's worth is more than 50000 then, the entier amount is taxable at applicable rates.

After entering into a valid sale contract between third party buyer Christopher is bound to sell 100 acres failure of which by giving 10 acres as gift to friend the aggreived party can file a suit against Christopher and can claim for the damages for the loss he/she suffered.