Relative deductions?

Question from H-Renei updated on 28th May 2013:

I have brought my grandparents' home and I have turned the property into a trust. I'm still paying off the mortgage on it. Now I have family living in the home which contributes. Is it possible to turn it into an investment property? I'm traveling from Wellington to Whanganui to do maintenance on the home every fortnight. Is there a business structure where I can claim on the maintenance of the home, on time and effort. Please advise?

Our expert Mark Withers responded:

Regardless of the fact that the home is in trust, the trust is able to deduct legitimate expenditure to the extent that the expenditure is incurred to derive income, in this case rental. Deductibility is limited by the capital limitation which prevents capital expenditure on the property being deducted for tax purposes. Deductions also can’t be claimed to the extent that they are private in nature, which would be the case if the property houses family members paying below market value rents.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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