From: Glenn Mott
I am interested to hear from an accountant's point of view, the tax implications for wrapping a property and different scenarios that may occur.
Correct me if I am wrong, if someone was to sell their property via vendor finance with a contract of sale (keeping the property in their name), the payments received would be a combination of:
a. return of capital
b. capital gain
c. income (interest)
This then allows for the payments to be treated differently for tax purposes, reducing the tax liability below what would be payable for income only.
However, say the contract of sale states that if the purchaser walks away from the deal prior to 5 years from inception without refinancing, the title stays with the vendor, the buyer's caveat is void and no monies are payable.
Does the vendor then become liable for income tax on the amounts claimed as return of capital or capital gain minus the amount of tax already paid on the capital gain portion?
Glenn
I am interested to hear from an accountant's point of view, the tax implications for wrapping a property and different scenarios that may occur.
Correct me if I am wrong, if someone was to sell their property via vendor finance with a contract of sale (keeping the property in their name), the payments received would be a combination of:
a. return of capital
b. capital gain
c. income (interest)
This then allows for the payments to be treated differently for tax purposes, reducing the tax liability below what would be payable for income only.
However, say the contract of sale states that if the purchaser walks away from the deal prior to 5 years from inception without refinancing, the title stays with the vendor, the buyer's caveat is void and no monies are payable.
Does the vendor then become liable for income tax on the amounts claimed as return of capital or capital gain minus the amount of tax already paid on the capital gain portion?
Glenn
Last edited by a moderator: