A lower court divorced me, but my wife appealed to the Supreme Court. So my divorce decree was put on hold pending the Supreme Court ruling on the case. Now my wife and I don’t want the court case to go ahead, so we want to go to the Supreme Court for an amicable divorce. Since I don’t have the amount to pay her as a lump sum alimony, I decided to gift my wife a property that is in my mother’s name. I would like to know if my mother can leave the property that is in her name to my wife at the time of the Supreme Court divorce settlement. I would also like to know if my wife will have any tax implications now and when she sells the property.
Under normal circumstances, when a mother-in-law makes a gift to the daughter-in-law, the income from such property must be in the hands of the parent-in-law who made the gift. I am aware that the land plot that is in your mother’s name will be transferred from your mother to your wife provided your wife agrees to the terms of the mutual divorce. There can therefore be no question of a lack of consideration for this transfer. It is not necessary for the consideration to be between the same parties. It can even be transferred by a third party.
The clubbing regulations apply as long as the relationship between mother-in-law and daughter-in-law exists. Since in your case the relationship between mother-in-law and daughter-in-law is broken up with the final divorce settlement, the question of clubbing does not arise anyway.
Since the apartment is transferred against payment, your wife is not liable for any tax for the receipt of such an apartment. However, once your wife sells it, she will have to pay capital gains tax on the capital gains calculated according to the provisions of the income tax laws.
Please note that the full value is not taxable as your wife can absorb the cost of your mother’s property as an expense and calculate the capital gains accordingly.
Balwant Jain is a tax and investment professional and can be reached at jainbalwant@gmail.com and @jainbalwant as his Twitter account.
Updated July 14, 2023 12:02 PM IST
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