You will need to check the balance sheet if the open market
value of the deceased's share is required.
First, check that the accounts are to the date of death or
very close to it (remember to enter the date of death in pencil at
the top of the balance sheet if it is not the same as the date of
the accounts). If there is a gap of only a few weeks between the
two dates, you can accept the accounts as representing the position
as at the date of death. If there is a bigger gap, for example if
the accounts were prepared more than a month before the death, you
will need to decide if the tax at stake makes it worth asking for
the date of death figures. If so, you should ask for a figure for
the deceased's share of profits less drawings from the date of the
balance sheet to the date of death. This figure should then be
added to the deceased's capital account.
If the deceased died late in the partnership's financial
year, the taxpayers may tell you that they do not intend to prepare
a date of death set of accounts but to wait until the next year end
accounts are due. Those accounts should show the deceased's share
of profits apportioned up to the date of death and so long as they
do, they can be accepted for our purposes.
Bear in mind that the taxpayer will not always have up to
date accounts when they obtain probate and may initially supply an
old set of accounts. Whilst these can be useful for providing
details of the partnership assets, do not forget to call for
delivery of the date of death accounts.
Remember also that the deceased's capital account figure
shown in the balance sheet will hardly ever reflect the open market
values of the partnership assets, e.g. land. That figure provides a
starting point from which any additions or deductions resulting
from examination of the partnership assets should be made. The
principles of balance sheet examination in partnership cases are
the same as for sole-trader businesses (
IHTM25082) with the difference that any
increases/decreases should, unless the partnership agreement
specifies otherwise, be shared amongst the partners according to
the profit sharing ratios.
