The Dunn Fund – A Taxing Question

Martin Dunn is to be congratulated for having the courage and funding to float such a vehicle. Punters will receive little if anything for at least 10 years, it seems, so the profits will all be in the selling of the houses in 11 years time. Capital gains over the next 10 years are very likely to be enjoyed so it seems a pretty sure bet.

From the information released so far it appears that the intention is to sell the properties off after 10 years has passed. I am assuming this is based on the “10 year rule” which basically says that anyone holding a property that long will be free of any tax on the gains.

However my advisors say that the “10 year rule” cannot be relied on, if the “intention” from the start was always to make a profit. In this case this new Fund seem to clearly indicate that this is its intention.

If the profits are taxed in 11 years time (or whenever) then will tax be payable and by whom? The fund or the investors and how will that effect the returns?

Would any clever accountants out there  please submit their opinions.

Dunn Housing Fund seeks $7.5m  

The public float of a new company that will invest solely in residential properties will open on February 17.
Dunn Housing Fund No 1 is seeking to raise up to $7.5 million by offering shares at $1 each, with a minimum subscription of $25,000.
The money raised, less upfront costs, will then be invested in up to 10 residential properties in the booming Auckland market.
According to the company’s prospectus, it is the intention to hold the properties as rental investments for at least 11 years.
During that time, shareholders will receive half-yearly dividends from the rental income the properties generate, after payment of expenses.

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