Hi, I did have a quick search for the answer on here.... Looking to sell a property in a Discretionary Trust. Losses over the years are $3-400k. Looking at selling a property which ill prob make $100k on. IP held for 5 yrs. Does the $100k stay in the trust or does it come out for each financial year ? eg. $30k annual loss in the trust offset by the $100k sale profit = $70k less 50% discount ? Thanks
Firstly review the trust deed. Are capital gains included as trust income for accounting and tax purposes ? If so the carried forward revenue losses in the trust will be sufficient to offset the gain. For a trust need to reduce the capital gain by 50% discount first then apply the revenue losses. You will need to ensure that the trust passes the trust loss rules to enable it to deduct the losses. If the trust has made a family trust election which covers all the losses then only the modified version of the income injection test needs to be passed. How did the funds get into the trust to fund the losses ? Loans ?
I read the OP question on the basis of the trust has a CGT loss. The individual may have a gain. In which case, the trust loss would be unavailable to the individual and would at best carry forward as a CGT loss in the trust capable of use only v's a future gain by the trust. The final point to the OP post also raises a question about revenue losses + CGT losses.
Hi, discrentionary trust. Losses are carried over by repairs and loans. I have $300k of total losses in trust. So if i make $100k on the property in a trust, I will have to pay CGT on that sale even though there are losses. Or is it just for the financial year ? eg 100-30k losses = 70k that will be taxed ?
Assuming the family trust election matters and loss tests etc are all ok the trust will have trust income that includes the capital gain and then may reduce the trust income by the losses. If the tax losses exceed the trust income then $0 net trust income may occur.
Trainee - Good point. Thats an important issue....If so the trust may still end up distributing a CGT gain of $100k (the sum before any discount) to the beneficiary and also a non-primary production loss of $30K. Net trust income may be distributed to beneficiaries but the beneficiary wont necessarily net the income elements off. If the taxpayer has a accrued CGT loss of $70K for example the discount value may be reduced. I would be seeking tax advice.
Hi, thanks for the replies. I am in between accountants at the moment I have $300-400k in total losses in the trust over the years. Each yr i lose about 30k in losses by holding properties. The property im looking to sell has gone up $100k
You are wording things poorly. Does the trust have $300-400k in losses? Or you (i)? Are these losses capital losses or carried forward income losses? Sounds like the later.
If you have 300k in losses, why would you use an example where the loss is lower than the gain? Since the trust clearly has more losses than gains. The question should then be. The trust has 300k in income losses. It makes 100k in capital gains. Is there net distributable income?
