Capital Gain/Contract Question

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From: Glenn M


I am in the process of selling an investment property and the chances are I will receive an offer today. Since I will make a nice Capital gain and want to defer this Capital Gain until next year's tax return, do I stall the buyer and ask them to sign the contract of sale next Monday i.e. 1st of July, or can I sign them up today and still somehow defer the Capital Gain until next year?

Is it the data that the Sale contract is signed that determines which year the Capital Gain should be placed in?

Just another quick question, I have to pay penalty interest to a bank of around $4,000 for breaking a fixed interest loan on this property I am selling. Hence, is this amount deductible, or does it form part of the Cost Base of the Property?

GlennM.
 
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Reply: 1
From: Dale Gatherum-Goss


Hi Glenn

>I am in the process of selling
>an investment property and the
>chances are I will receive an
>offer today. Since I will make
>a nice Capital gain and want
>to defer this Capital Gain
>until next year's tax return,
>do I stall the buyer and ask
>them to sign the contract of
>sale next Monday i.e. 1st of
>July, or can I sign them up
>today and still somehow defer
>the Capital Gain until next
>year?

You should defer signing the contract until July 1. If you sign beforehand, you will have to declare the Capital gain in this year's tax return.

It might sound silly, but, we normally suggest to clients that they estimate their gain with us and then we suggest that they place 25% into an offset account (or T/D for 18 months) so that the funds are available when it comes time to pay the tax.

>Is it the data that the Sale
>contract is signed that
>determines which year the
>Capital Gain should be placed
>in?

Yes, it is the date that the contract is signed. Unless, there are conditions within the contract that must be fulfilled for the contract to be unconditional - such as you obtaining council permits or something.

>Just another quick question, I
>have to pay penalty interest
>to a bank of around $4,000 for
>breaking a fixed interest loan
>on this property I am selling.
>Hence, is this amount
>deductible, or does it form
>part of the Cost Base of the
>Property?

No, it is a tax deduction.
>
>GlennM.

Cheers

Dale
Would H&R Blockheads know this?
 
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Reply: 1.1
From: Glenn M


Thanks Dale.


GlenM.
 
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