Advice on Purpose of Loan

W

WebBoard

Guest
From: Grant A-Y


Calling all IP finance gurus!

I understand the concept of the tax deductability of a loan being determined on the purpose of the loan.

My question is, (following on from last night's one on inheritance): Can I claim deductions for a loan to buy out my brother's share of a property I own with him if the house is to be used as an IP?

My logic is that I am "buying" his share for my investment purposes.

All help gratefully received and without prejudice of course.

Grant A-Y
 
Last edited by a moderator:
Reply: 1
From: Rolf Latham


Hi Grant

Yes I might venture that the interest on those borrowings would qualify under 51.1 of the tax axt. Im no tax specialist but if you can prove you are deriving income as an indirect result of the loan it qualifies

Ta

Rolf
 
Last edited by a moderator:
Reply: 2
From: Ian Findlay


My understanding of the tax laws are that the inportant thing is the purpose
of the interest. If the interest is used to pay for an investment then yes.
I guess you'd need to show that you are recieving market value rent though
just in case there were any questions.

I'm not an accountant so take proper advice.

Ian


----- Original Message -----
From: "propertyforum Listmanager" <[email protected]>
To: <Recipients of 'propertyforum' suppressed>
Sent: Monday, May 14, 2001 10:21 PM
Subject: Advice on Purpose of Loan


> From: "Grant A-Y" <[email protected]>
>
> Calling all IP finance gurus!
>
> I understand the concept of the tax deductability of a loan being
determined on the purpose of the loan.
>
> My question is, (following on from last night's one on inheritance): Can I
claim deductions for a loan to buy out my brother's share of a property I
own with him if the house is to be used as an IP?
>
> My logic is that I am "buying" his share for my investment purposes.
>
> All help gratefully received and without prejudice of course.
>
> Grant A-Y
>
>
>
> To reply: mailto:p[email protected]
> To start a new topic: mailto:p[email protected]
> To login: http://bne003w.webcentral.com.au:80/~wb013
>
>
 
Last edited by a moderator:
Reply: 3
From: Dale Gatherum-Goss


HI Grant

I am a CPA and yes, the interest and fees would be tax deductible. Bye the way, you would be wise to obtain a valuation on the property and keep this in a safe place as you will be "deemed" to have acquired the property at its market value and not the actual cheque amount for Cpital Gains Tax purposes.

I hope that this helps

Dale
 
Last edited by a moderator:
Reply: 3.1
From: Robert Forward


So Dale if I get what you are saying here.

If I purchased a property at $100k but it's real value was $150k and I had a qualified valuation to prove this when I go to sell the property I would only pay CGT on the difference between the "market value" rather then my purchase price? So I get $50k tax free. Mmmm. That would be good.

I think most in here would like an answer to this.

Cheers
Robert
 
Last edited by a moderator:
Reply: 3.2
From: Grant A-Y


Thanks all for your answers, and particularly Dale's important tip.

Grant A-Y
 
Last edited by a moderator:
Reply: 3.2.1
From: Les .



G'day all,

And especially Dale - and perhaps Rolf ...

Taking Dale's comment at face value, it sounds like the increase in VALUE of the property is what gets Taxed (CGT), not the increase in your Equity.

One thing that regularly occurs is that a property is valued by the lender at exactly the same amount as the contract price (funny, that !!!).

So, given your statement (or my interpretation of it) is true, does that infer that a privately arranged valuation that gives a true MARKET valuation at time of purchase would allow me to adjust the Capital Gain based on this valuation, rather than the money I expended to purchase ????

If that were the case, an extra $200 at time of purchase would be a great Insurance policy for a (normally) Buy and Hold bloke.

To help by using numbers, try this:-

Brisbane IP, purchase price $120k, market valuation at time of purchase $150k - 3 years later, I'm looking at selling for $220k - what CGT would I be up for (disregard any Capital Costs incurred, Depreciation added, etc - just go with the above numbers, please).

Eagerly awaiting an answer to this one - and thanks to the original poster (Ian, was it?) for initiating this topic !!!

Regards,

<FONT SIZE="4" COLOR="#0000FF">
Les
</FONT
 
Last edited by a moderator:
Back
Top