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37. Reservation to Chapter 24: Estate and Gift Duty
My reservation refers to the Committee's proposals in relation to partnerships and in particular to its view, stated in paragraph 24.A68, that a clause in a partnership agreement to the effect that the interest of a retired or deceased partner may be acquired by the remaining partners at a price determined in accordance with the agreement should be ignored in valuing this interest for estate and gift duty purposes.
It is my understanding that the present law as determined by judicial interpretation provides that, for estate duty purposes, the value of an interest in a partnership held by a deceased partner at the time of his death is its value as fixed by the terms of the partnership arrangements because this is its realisable value. Were the value to be fixed at a figure in excess of its realisable value and duty assessed on the higher figure serious hardship may be suffered by the widow and dependants of the deceased partner. In addition, the value agreed upon by unrelated members of a partnership for the amount which the continuing partners shall pay for the interest of an outgoing partner is normally fixed by arm's length negotiation having regard also to other partnership provisions. In these cases it would be inappropriate for the law to provide that the agreement should be ignored when valuing an interest for estate and gift duty purposes.
Accordingly, in my view, the Committee's proposal in paragraph 24.A68 should apply only to interests in partnerships where the outgoing partner is related to one or more of the continuing partners.
K. Wood