Are national travel costs tax deductible?

Question from Carron updated on 24th July 2008:

We have set up an LAQC and are in the process of purchasing our 1st property. It is currently tenanted. Our goal is to have tenants until they want to leave (anticipate in approx 4-6 months), do the house up, then re-tenant. Hold onto the house for 18mths - 2 years, then sell for a profit. Are the costs of our national travel to inspect the property tax deductible? we had a conditional contract for purchase at the time. And should we depreciate, or will it just be a hassle when we sell it for a profit in 2 years (approx)? And are the costs of the mortgage documentation bank fees tax deductible? thanks

Our expert responded:

This is the sort of situation that needs to be closely considered with an accountant. Your issue is not so much the question of what to depreciate, but what your intention is at the time of purchase. At this time, your intention is to on-sell the property after a couple of years. On that basis, tax will be payable on any capital gain made. Another issue is that as your intention is to sell the property, the issue of tainting arises as you are doing this transaction through an LAQC where you will own the shares personally. Tainting has far reaching consequences, is something to be avoided, and needs advice particular to your circumstances. Costs such as travel and loan fees will be tax deductible.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth.  She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.




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