Transferring Assets

From: Michael G


Peoples,

I am currently renting, but I also own a townhouse in the same suburb.

A thought in my mind currently is that it may possibly be cheaper to live in my own townhouse.

If I factor the interest on the loan, plus all the expenses, then it may be cheaper than the rent, well if I took into account tax deductions, then again maybe.

At the moment the property is in my name (and I'm single), and I think I have two options.

1) Remove the tenant, move in and pay the interest and costs.

2) Shift the property from my name into a family trust. I then rent the property from the trust, and being an investment in a trust the deductions flow to the beneficiaries.... me.

With option two, the downside is a possible stamp duty cost, due to it being an asset transfer, I'm not too sure about capital gains.

Besides, going to an accountant on this one (which I will), does anyone have any input on this idea?, has anyone done it before?, what problems/solutions did you uncover?

Regards
Michael
 
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Reply: 1
From: Duncan M


>and being an
>investment in a trust the
>deductions flow to the
>beneficiaries.... me.


Wrong... A loss in a trust stays there. It may however be carried forward to be offset in the profit of a future year.. But a loss cant 'flow' to a beneficiary..

Regards,

Duncan.
 
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Transferring Assets-Duncan I need your opinion

Reply: 1.1
From: Marina. L


Duncan,
I am building my future home and will be renting it out for 1 year.
I will then move into the property and rent out the "old house".
So my dilemma is that I will have a huge non-deductible debt on the new home and I will be paying tax on the rent received from the old house (this house has no mortgage).
Everyone says that I should sell the old house and then use the funds to reduce the debt in the new home.
I love my old house, and I just couldn't bear to part with it.

Would you be able to elaborate further if a Trust situation would work in this situation. ( I could put the funds into the new home and then rent out the new house to myself ) Is this how it works?
Would I set up the trust after I move in or would I do it now. If I do it now I would
miss out on being able to claim all the interest on the progress payments and I would miss out on the huge tax deductions on the new property.

What do you think I should do?

Your advice would be much valued.





MARINA
 
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Transferring Assets-Duncan I need your opinion

Reply: 1.1.1
From: Duncan M


On 3/22/01 8:33:00 AM, Marina. L wrote:
>Everyone says that I should
>sell the old house and then
>use the funds to reduce the
>debt in the new home.
>I love my old house, and I
>just couldn't bear to part
>with it.

I agree. Foolish to part with it purely because it's going to generate income that you'll pay tax on.. Especially as you'll then miss out on any future capital gains.. Its the usual knee-jerk reaction you get when talking to friends who have no idea..


>Would you be able to elaborate
>further if a Trust situation
>would work in this situation.
>( I could put the funds into
>the new home and then rent out
>the new house to myself ) Is

Its a grey area.. see the message in the Thread re "Transferring Equity".. You need to decide what you're going to do before buying land and commencing construction.. The profit in your old home could well be offset by the loss your new home will make. Coupling these together in a trust could be quite effective.. See an Accountant/Lawyer mention Redman vs FCT.. you will lose the CGT concession on the place if you hold it in trust..

Dont forget, I'm a real amateur at this stuff..

Regards,

Duncan
 
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