Please see below an excerpt from Dale GG's "Trust Magic" book which I bought yesterday (p198-200 of the PDF for those who have it):
So based on this, it seems as though the following scenario could happen:
- Smith Family Trust buys IP $200k
- 30 years later, John Smith as trustee decides that the Trust is to be vested and John Smith as beneficiary is to receive the property "in specie"
- John Smith receives IP which is now worth $800k. No CGT or SD. Cost base for CGT is $800k
- John Smith sells property for $800k
- No CGT payable
Opinions? Have I missed something?
John
However, a Trust may be closed or vested (as the lawyers and accountants would say) any time before the end of the 80 year period by a choice made by the Trustee of the Trust. This may be done by a simple minute.
However, most Trustees would simply transfer the assets ?in specie? (which means, ?as is?) to the beneficiaries of the Trust via a carefully worded minute of a meeting as doing so will generally mean that the transfer will be exempt from both Stamp Duty and Capital Gains Tax (CGT).
By the way, the good news is that when a beneficiary of the Trust receives the property or parcel of shares without having to pay for them as a result of this ?in specie? distribution they are deemed, by tax law, to have received them with a cost base for CGT purposes equivalent to the market value of that property, or, that parcel of shares, at the time of the transfer.
So based on this, it seems as though the following scenario could happen:
- Smith Family Trust buys IP $200k
- 30 years later, John Smith as trustee decides that the Trust is to be vested and John Smith as beneficiary is to receive the property "in specie"
- John Smith receives IP which is now worth $800k. No CGT or SD. Cost base for CGT is $800k
- John Smith sells property for $800k
- No CGT payable
Opinions? Have I missed something?
John