Can I pay capital gains from LAQC without accruing tax liabilities?
Question from Mike updated on 27th October 2006:
Our expert responded:
LAQCs have some rules that give them added flexibility compared to a standard company. LAQCs can distribute capital gains tax free without the necessity of liquidating the company. The capital gains are not paid out as a shareholder's salary. The catch though is that the capital gain can only be paid out as long as the company is in a net positive position. For example, let's say that the net asset position of the LAQC is -$50,000 as a result of losses incurred. You sell one property and have a gain of $60,000. The gain made must first be used to bring about a positive net asset position for the company. Therefore, the maximum tax free capital dividend that the LAQC can pay out is $10,000.
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.