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Circular 158 / 17.10.2006 / LODGE Partnerships / Tax Commentary ONLY RELEVANT TO LODGE PARTNERS OR FORMER LODGE PARTNERS There have been a number of changes in the partnerships in 2005 and 2006 that will have tax implications for all current and former Lodge partners. We thought it might be helpful if we summarised the situation in this written communication which represents a tax commentary and not specific tax advice. Lodge Partnership Interest Sales Last Quarter 2005 Thirteen partners exited from the Elm, Fir, Hazel, Gamma and Alpha Partnerships in the last quarter of 2005 by selling their partnership interest to independent third party purchasers. The internal transfers necessary to effect these retirements from the partnerships resulted in a Capital Gains Tax liability for all of the partners. The exiting partners put their respective partnerships in funds to discharge this CGT. This liability was paid to the Revenue by the partnerships as preliminary tax for each partner and you may have received a receipt from Revenue in this regard. It is still an obligation for every partner of these five partnerships to report the capital gain on their 2005 tax return. You have been previously advised of the amount of tax already paid, which is at 20% of the deemed gain. Those partners who sold in the last quarter of 2005 may have an additional Capital Gains Tax liability on their retirement from the partnership and gain on disposal of their designated lodge. Each of those partners was notified of their liability by Marie Barr of Barr Pomeroy. Partnership Exits 2006 Approximately 40 further partners exited from the partnership so far in 2006 by transferring (selling) their partnership interest to themselves. This will result in a Capital Gains Tax situation only for the exiting partners and not for the remaining partners. Those partners who exited will have preliminary tax liability that would normally be payable on 31 October 2006 (or 16 November 2006 if filing online). Barr Pomeroy has advised each partner of his/her liability. This liability was NOT collected or paid by the partnerships. In the case of those partners who intended to exit from the Oak partnership and entered into a binding contract that cannot be completed because of the probate difficulty in relation to the estate of one deceased partner, we suggest that these partners consult their own tax advisors to determine if CGT is now payable on the exit contract amount. VAT should not be payable until the sale closes. Income Tax 2005 Partners' Case I income tax for 2005 is based on accounts to 30 April 2005. Tax computations, and important notes, on these accounts have been previously circulated to all partners. Those partners who disposed of their partnership interest prior to 31 December 2005 should consult their own tax advisors regarding their cessation from the partnerships. Income Tax 2006 The accounts to 30 April and tax computations for 2006 will be somewhat complicated because of a large number of partnership exits. We will be writing to you further on this in early 2007. Direct Payments by Partners Partners are generally making direct payments for service charges and
ESB and TV licence fees. It should be noted that these charges are treated
as expenses of the partnership and appear as such in the partnership accounts
while the property remained within the partnership. In these circumstances
these payment by partners will be treated as a credit to their current
accounts, so payments should be ignored by individual partners when considering
their income tax position. If you have made payments for ESB and TV Licence
Fees directly whilst still a partner then you need to copy these invoices
to Stephen Ross of O'Donovan Stewart & Company, The Mews, 10 Pembroke
Place, Dublin 2 who will be preparing the partnership accounts. I hope that this rather complicated communication is of help to you! Gerry Murphy
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