Readers’ forum: Transfer of deceased partner’s share to partnership

I act for a partnership of three partners where profits losses and gains are shared equally. The partnership agreement says that on the retirement or death of a partner their interest in the partnership assets would be sold to the remaining partners. One of the partners has just died and I am trying to work out the capital gains consequences.

At first sight it seems straightforward. On the partner’s death the fellow partners will acquire a one-third share of the partnership assets at their agreed market value. There is no tax on the disposal as death is not an occasion of charge for capital gains tax purposes. But I am worried that it may be more complex than this.

First it is not the deceased partner making the disposal it is the executors after death who are making the disposal to the remaining partners....