A development partnership has taken many years to complete and sell the properties, and during that time interest due to the partners on finance provided has created large losses for tax purposes.
The partners now wish to to forego the interest due to them, which has been added to their loan accounts. This will create a profit in the final year which they can nullify by using the accumulated losses.
The capitalised interest has been included on the partners' tax returns, and minimal tax has been paid on this, which they are quite happy to accept.
As far as I can see, this is just an accounting exercise with no tax implications, but I'd love to hear other opinions.
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