Should I sell to a LAQC and rent the property back?

Question from Stephen updated on 22nd January 2007:

I own a property in Glenfield and am currently living in it. I currently live in it with my partner and 5 tenants. I know large house and I'm only 21. I am wanting to know if it is possible to sell this house to an LAQC and rent the property back off of the trust. So that I can live there along with my other tenants as well as having the property protected and being able to get any tax relief on the income I am receiving from them vs the interest I am paying. Any help would be great!

Our expert responded:

Another question fraught with difficulty, selling a property to an LAQC and being your own tenant (albeit one of seven) and landlord. IRD have ruled on this situation and called it tax avoidance because in their minds, there is no commercial reason why you would sell your home to an LAQC and then rent it back. Which is fair enough. In your situation though, you do have five tenants already paying rent, which presumably you are disclosing through your personal tax return, and that may be the saving grace. If you can demonstrate that your rent is equal or less to what the others are paying so that your rent is incidental to the overall total, then you will probably be fine. You should go and see your accountant to get a definite answer.

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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