Hi
We are in a situation where we need to sell our investment properties in SA. There are 4 properties in total bought a couple of years ago for a total of $700K (incl all fees). Current market valuation puts the total at a possible $20-30K total loss, i.e. we would get back about $670K after all fees paid out. The properties were bought as a Unit trust which is owned by a Family Trust. If we were to sell with this loss, how does the capital loss get worked out with this structure? The Unit trust would be dissolved once all properties were sold.
I know that a capital loss can be offset by future capital gains, but how many years into the future are we looking at? And if the loss has been incurred into a Family trust could this be offset against our income?Any thoughts are appreciated thanks.
This is confusing "The properties were bought as a Unit trust which is owned by a Family Trust."
Is the onwer of the properties a trustee of the unit trust with the discretionary trust owning the units?
What would happen if this is the case is that the trustee would sell the property. If it is at a loss then the unit trust would have the loss. The discretionary trust would still own shares in a unit trust – but with no assets. A requirement for a trust to exist is for it to hold property, so a trust without any property (in general sense) could mean the trust fails.
Since you personally didn't incur the loss you would not be able to claim it or to offset it against future income. A way around this is for the trust, unit or discretionary, to make some income or you divert some income into the trust so that the loss can be offset. But since it is a capital loss you would generally need a capital again to offset it.
If the unit trust was able to continue then the loss could be carried forward without restriction.
Its a complex situation that you will need to get advice on.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
As Terry touched on, the simple answer is that the capital loss will be trapped in the unit trust, as the unit trust was the owner of the properties.
If the trust is to be vested after the sale of the properties, this capital loss will disappear. If the unit trust continues operating, it has no assets, which could cause legal problems. (ie – what it is the trust holding in trust if there are no assets.)
It wouldn't matter if the loss was in a family trust or unit trust, it is trapped until you have a capital gain to offset the prior loss.
Perhaps the trust could be continued by settling new property on it before it sells all of the real property.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Or buy some shares, much easier to ranger trade to make a cg. & profit.
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