Claim Large losses on o/s property sale on Tax?

[li21]

Hi all,

In 2005 we purchased a investment property for $44,000USD , spending close to $60,000 USD on agents fees, taxes, bills, insurance and misc items.
(From those b*stards at Genesis REI)

Over the years we did not see a cent of profit , in fact its a money pit.

We have been forced to sell since its eating at our cash flow.
Realistically, we might have a chance of a sale at $28-$30k USD.

If we do sell at this price, we would have endured a huge loss.

Since we never made a cent on rental income, we never filed US tax returns.

What are the chances that we can claim these losses on our Australian Tax return? Under what category would that come under ? Im guessing capital losses but would we be eligable to make this claim over 1 year or a few?

Any input would be appreciated.
Thanks!

 

[Rob G.]

International tax is incredibly complex, as there are not just two national laws to deal with, but also individual double tax agreements and exceptions.

ANY advice on this subject requires somebody who specialises in these issues, consider this in your other costs of investment.

Capital gains tax is not a part of most double tax agreements, but I am pretty sure it is for the US/AUS arrangement, in which case it will most likely overrule Australian tax laws.

*GENERALLY* in Australian tax law you will have a capital loss from your overseas disposal - but may be adjusted by any loss you are able to claim overseas. But again this is subject to the US double tax agreement.

You really need to talk to a specialist.

Cheers,

Rob

 

[marg4000]

I have no idea of the US/AUS situation, you will have to talk to an accountant experienced in foreign income.

You talk about "claiming" capital losses. These are not an immediate tax deduction.

Capital gains and losses are treated separately. If you have an allowable capital loss, it can only be offset against a capital gain. If you have no capital gains then you simply carry forward the loss until you have some gains to offset it against. If you never make a gain then I guess you never benefit.
Marg

 

[josko]

Hi li21,

I'm not much help, but I can let you know my personal experience with Nz properties I bought and sold. I made a profit.

I had to abide by the NZ tax laws as you will with US Tax, but my capital gain minus my loss was added to my income and taxed at my taxable income rate.

Therefore I would assume that your loss will be treated as any investment loss and subtracted from your taxable income.

As stated above though only a qualified accountant will ascertain this for you.

 

[Rob G.]

The problem is that UK and US DTAs with Australia are pretty comprehensive and cosy.

I suspect Australia might surrender any rights to CGT on real property in those countries.

However, I don't feel like spending the long weekend reading the US DTA.

That is why international specialists are so hard to find ... and cost so much.

You could also try phoning the ATO.

Cheers,

Rob

 

[Rob G.]

Hi all,

What are the chances that we can claim these losses on our Australian Tax return? Under what category would that come under ? Im guessing capital losses but would we be eligable to make this claim over 1 year or a few?

Forgot about this one ...

Check out IT 2562 about setting off foreign source capital losses.

Cheers,

Rob