Hi Bort
Yes, the trust can borrow money against its assets (one IP or many IP's) and redeem the units from the SIU holder. The trust can then claim the interest on the loan used to do this. The redemption price must be, in accordance with the trust deed rules, at least as much as was paid for the units.
Therefore, if the units were bought for $1 each they must be redeemed for at least $1 each.
You are correct, the trust has not disposed of the property and so the trust does not have a CGT event.
Have fun
Dale
Yes, the trust can borrow money against its assets (one IP or many IP's) and redeem the units from the SIU holder. The trust can then claim the interest on the loan used to do this. The redemption price must be, in accordance with the trust deed rules, at least as much as was paid for the units.
Therefore, if the units were bought for $1 each they must be redeemed for at least $1 each.
You are correct, the trust has not disposed of the property and so the trust does not have a CGT event.
Have fun
Dale
bort said:can the HDT then borrow a further $500k against the property (assuming an appropriate bank valuation etc) and pay out the unit holder MrX for their initial $500k worth of units purchased?
Given their has been no CGT event on the property at that point in time, does that mean no capital gain needs to be distributed (I assume this is the case) - or would you need to revalue the units based on the increased value of the property and pay out $1m for the 500k units to MrX? (oh and would this be the same for shares which have a ready market valuation?)
If you did not have to revalue the units, and paid MrX $500k, and then later on when the HDT did sell the property, the CG could be distributed to any beneficiary? or would it still be restricted to the prior unit holder MrX?