Selling IP Property – price relation with Holding Cost

Thanks James – agree to your point but my point is Is calculation i stated is correct or not? If correct then it is difficult from investor point to make profit, i suggest people you bought say in 2003 on wards should work out and see whether it is worth on hold on. Answer to your point on formula i clarify as follow

Purchase price including all cost >> 450K

Calcuation formula for Holding cost is

1 Gross Income  50000
2 Net loss from property 20000
3 Taxable income without property 50000 ,  
4 Taxable Income with Property 50000 – 20000=30000     (3 – 2)
5 Tax 30%(assume)   on 3  is 15000    –   without IP
6 Tax 30%(assume)   on 4 is   9000      – with IP after taking out loss from Gross Income
7 Tax Saving due to IP  15000 – 9000= 6000  –  ( 5 – 6)
8 Holding Cost 20000 – 6000 = 14000             – (2 -7   ie loss – tax saving)

thanks
Satish

Hi Scott
First i am not an expert in this , still request you or others to explain

Essentially, you are trying to work out how much you will need to sell the place for in order to make a profit ie $450 + $70 = $520k

"Yes , that what i aim i know it is market which will determine price"

Unfortunately, property value is determined by the market and it will only pay market value as the buyer does not care whether you have doubled or halved your money at the end of the day as they are not privy to that information.

"Agree"

Even if you are trying to determine whether you are going to be liable for CGT or not, this calculation is useless. All calculations must be made without consideration of tax implications as everyone's tax situation is different. You would also then have to factor in the effect of cgt into your calcs.

"Yes I have stated in my original question"

If this was an IP, then you will be liable for cgt if you sell for more than you purchased, conversely you can also make a capital loss.

"Agree -sell  it for say 520K  if purchase is 450K , Profit 70k   and  apply cgt"

So in answer to your original question "should the Holding cost be factored into the price when selling", the answer is no, as it up to the market to determine.

"thanks, yo u answered this part, now as i said to James , IP may not good given the example i stated, which many people like me may not know or work out their holding cost, they see the purchase price and selling price, it could be higher (profit) or lower (loss). If your holding cost is recovered then i think it is good investment otherwise it is not. Can i say on papers it is profit but actually it is loss while taking into account holding cost. Is it correct statement?

I would like to discuss with some one who is expert on my views as stated in orginal meessage.

thanks

satish