20 Questions To Ask About A Capital Gains Tax

CAPITAL GAINS TAX
TWENTY QUESTIONS TO ASK BEFORE YOU BUY (OR SELL) YOUR PROPERTY

1.If you own a home you live in but then move into the home of your partner and rent your house out to cover expenses
does a CGT apply if you later sell your home for more than you paid for it?

2. Your mother becomes frail and leaves her apartment to go into a retirement home. If she rents out the apartment to help pay for the retirement home
and eventually sells it for more then she paid does she pay CGT?

3. If your mother passes away while she is in the retirement home and leaves the apartment to her children in her will, do they pay CGT if they then sell it.

4. You and your partner buy an investment property. You and your two children spend a lot of money upgrading it to make it a nice rental property. Besides using contractors to do the specialist work you spend 100’s of hours cleaning, painting and scraping down the woodwork yourselves. Some time later you sell it for more than you paid for it. Does your labour get included in the overall expenses and if so at what rate per hour each can be charged for your time including the children?

5. You and a friend buy a house 50/50 between you. For you it’s your first home, and for your friend it’s an investment. Does CGT apply to one or both of you if you eventually sell it for a profit?
What happens if the investor / partner lives in the home as well?

6. You own a farm that’s been in the family for generations. You want to leave a third of the farm to each of your three children and keep the homestead and a few acres. You sell at well below market price because of love for your children. Do the children become liable for CGT if they sell later on at market price? Do you have to pay CGT on your homestead if you sell it as it is a newly created property when you gave parts of it away?

7. You buy an investment property to set up a retirement fund for retirement. Unfortunately it’s a leaky home and the costs to repair are impossible to pay. You sell it for a big loss. Can you claim the loss in full as a tax deduction against your total income in the future?

8. You own an investment property but times are tough. You can’t keep up the mortgage payments so in the end it is sold by force through a mortgagee sale. Surprisingly there is a small profit left over for you after all the mortgagee expenses have been paid. Do you pay CGT on that small profit despite it being a forced to sale?
In the same case if the house is sold for more than you paid for it, but the mortgagee takes all the proceeds, do you still pay CGT although you got no money out of the sale?

9. You and your brother / sister bought an investment home together. Later you sold it in order to buy two apartments for you to each live in as your respective homes. If you pay CGT on the sale you will not have enough to buy your separate apartment homes. What happens in that case?

10. You buy a share in a large syndicate syndicate and all goes well. Later a majority of the owners decide to sell, although you voted against it. The sale goes through and you have made a profit against your will. Do you have to pay CGT on that profit?

11. Will there be a time limit of ownership before a CGT no longer applies and will inflation be taken into account?

12. If you own an investment home through a Trust of private company and later sell it for a profit, will the Trust or company be liable to pay CGT or the Trustees, beneficiaries or shareholders?

13. If you own a business and work very hard at it for years and it becomes very successful what happens if you sell it one day for a profit. Does that attract CGT, and if so how is it calculated?

14. If a CGT is brought in will it be retrospective and catch all properties bought before the tax is in place? If not, does that mean there will be two markets, pre tax and post tax so those who bought before the tax can keep all profits tax free, while those who bought after the tax will pay it?

15. If you sell an investment property and CGT is payable do you have to pay it when the deal is signed up or when it is settled? What happens if there is a very long settlement date?

16. If you buy an investment property would it be better to split the ownership up between members of the family to take advantage of lower tax rates or will the CGT be applied equally?

17. If you move overseas and leave your home rented out while you are away, but then decide to sell it, will any profit be subject to CGT?

18. If your investment property is totally destroyed by fire or earthquake, and you get paid out by the insurance company, is any profit over the original purchase price be subject to CGT?

19. If you sell your investment property one day, is CGT apply to the chattels that were included in the price, even if they make up a large part of the total money paid?

20. You feel sorry for your children who are struggling to buy a home of their own. You buy a home for them and allow them to pay you a cheap rent while they save up a deposit.
They eventually buy from you at less than market price but more than what you paid for it. Does CGT apply in this case?

 

Also posted on: http://www.interest.co.nz/

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