Question from Jo updated on 10th April 2013:
I own two rental properties in an LTC and five in a partnership with my spouse (two bought prior to company setup and three bought after the LAQC rule change). My accountants recommend that I sell the two properties out either to ourselves or to our trust (which currently owns our family home) to save on accounting costs. They are also recommending purchasing future properties in our own names. Do you agree?
Our expert Mark Withers responded:
Whilst nobody likes spending money on accountancy costs my view would be to determine the best long term structure based on your likely profitability, personal incomes, asset protection views and family circumstances. I presume the LTC is owned by you alone which might be the reason you weren't able to transition the LAQC to partnership during the transitional period? I guess you need to consider whether there was any reason to own the LTC personally, was the LTC separate property under a matrimonial agreement perhaps? It is fair to say that the LTC is really just a partnership wearing the cloak of a company with the added disadvantage of a loss limitation rule so may be an entity surplus to requirements. If you are close to profitable on the LTC properties the trust may be a better long term bet but really it all depends on circumstances. Remember the depreciation recoveries are triggered if you sell the properties out of the LTC and this should factor into the cost equation along with everything else.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.