Rob Balanda deals with the issue of CG and income that may arise from the IP held in the HDT by issuing capital and special income units as follows:
"One beneficiary can hold the income units and effectively claim the negative-gearing loss as a tax deduction in their personal tax return and another party can hold the capital units.
If the property eventually becomes positively geared and makes a profit or is sold for a capital gain then the profit or capital gain can be distributed to the other unit holder (the capital unit holder). Hybrid trusts therefore are the most flexible structure that can be used and have all the advantages of unit trusts and discretionary trusts. However because they're a combination of the two types of trusts they also have the disadvantages of both trusts and they are expensive. Sometimes they can be very expensive, particularly where a family trust needs to be set up as well to hold the capital units in the hybrid trust to give maximum flexibility. The costs can often be double the costs of acquiring a company and establishing a family trust and the continuing costs are much greater as well."
It seems a different approach from DGG, who treats both CG and positive operating profit as income to be distributed to the holders of the special income units. I wonder has anyone tried Rob's approach or similar?
F