Property problems: Tax law on property transactions complex

Monday 29 March 2004

Q. Last October, the IRD warned investors to check out the tax implications before buying real estate property purely to sell it on for a quick profit. I realise that if I buy property which I hope to resell at a profit in the short term, the profit will be taxable.

What if I buy one or more properties for long-term rental purposes and occasionally buy a property for a quick sa

By The Landlord

le? Will I be taxable on any (capital) gain on the eventual resale of any of the long-term rental properties?

A. As the IRD's October media release states, the tax law on property transactions is complex and people need to seek professional advice.

At its simplest, where real property is bought to resell, any profit realised on sale is subject to tax.

Conversely, if such a property is sold at a loss, that loss is deductible (although documentary evidence that the property was bought for the purpose or intention of resale may be required to support the deduction). Incidentally, this is also the case if it is personal property, not land which is bought and sold.

Even if a particular piece of land was not purchased for resale but for a long-term hold (say, to rent), and the property is resold within 10 years, any gain on the sale (over cost) may be taxed.

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