How do I get the full tax benefits of a LAQC?

Our Experts Answer:

Unfortunately, you have had some poor tax advice and this only highlights (again) the need for people to get advice from professionals experienced in this area.  Believe it or not, it's true - you get what you pay for!  In order to sell the property from yourself to your LAQC, it must be at market value which is likely to be more than what you paid or the mortgage you currently have on the property.  The losses do not necessarily arise from the shortfall between your rental income and loan repayments - that could be a cash shortfall but not a tax shortfall because the repayment of principle on a mortgage is not tax deductible, only the interest is.  The other big contributor to the tax benefits is the amount of depreciation, so make sure you can a chattel valuation.

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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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