Will selling to my LAQC trigger tax issues?

Question from Ron updated on 1st February 2011:

I have created a LAQC and sold my property to the LAQC at market value. However, previous to forming the LAQC, I have claimed tax losses on the property for the last four years under my name from the IRD. Does the sale of the property to the LAQC mean that I have to pay tax on the depreciation recovered under my name and do I need to declare anything to the IRD stating that I have done this sale? Going forward, do I just attribute losses to myself under the LAQC since I am the shareholder?

Our expert Mark Withers responded:

Yes, the sale of the property to the LAQC will trigger tax issues associated with its disposal in your tax return. This will include a depreciation recovery assuming the market value disposal of the building is in excess of its depreciated book value. Note that because the transfer is between associated parties depreciation in the new company is limited to the same rate and cost base that was used by you as an individual. 

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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