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Readers' forum : Bailing out

28 March 2017
Issue: 4593 / Categories: Forum & Feedback

Disposing of an interest in a property development trading partnership.

My client has entered into a property development venture in the form of a limited liability partnership (LLP) which purchased a property to convert it into individual units for sale. The three LLP members are the investor (my client) and the developer (as an LLP and limited company). The project is now into its second year with the property and developing expenses shown as trading stock in the LLP’s accounts (with the other significant balance being the investor’s capital account).

The joint venture agreement provides that if the developer fails to meet agreed deadlines the investor can require the developer to purchase his ‘entire aggregate interest equal to the price of the property had it been sold at market value’.

Originally it was thought that the sale of the completed units by the LLP would be treated as income and subject to income tax in the hands...

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