We have two clients who have passed away with investments in film partnerships. The film partnerships will not allow the estate to assign the partnership interest to the beneficiaries of the estates without the connected bank loan being assigned. The lending banks are not willing to make any assignment.
This leaves the two estates stuck with the film partnerships until the partnership interests cease. The estates are paying basic rate tax on the partnership profits but cannot claim any relief on the interest on the connected loans.
Once the estate is closed when the film partnerships cease all the estate income is taxed on the individual beneficiaries calculated with the total film partnership income less the loan interest with the net carrying a basic rate tax credit.
As the income accumulated will be significant this will create an additional liability on the beneficiaries. The beneficiaries in both cases are low earners so if the income could be taxed on them each year there is likely to be only a basic rate tax liability.
Does anyone know how we can ensure the income can be taxed on the beneficiary each year rather than accumulated until the estate is finally closed
Thanks,
Andrew Magilton
TFO Tax LLP