Liquidating a company that owns a property

Discussion in 'Legal Issues' started by thankyou9, 2nd Jun, 2020.

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  1. thankyou9

    thankyou9 New Member

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    Hi!

    I'm in need of some advice and I would be really appreciative of anyone generous enough to share their knowledge with me.

    Myself and another family member are each due to inherit a 50% share of a company. The only asset of the company is a 2 million dollar property and some accumulated rent in the company bank account. The property itself was bought some 30-40 years ago for a pittance.

    Due to conflicts in management of the property, it seems like a possible outcome could be to liquidate the property.

    If the company is liquidated, would we be due to receive the entire sales price of the property? Or would we be hit by a huge amount of Capital Gains Tax, Income Tax and GST?

    I have been unable to find the relevant info online and I don't have the means to speak to a specialist - is there anyone here who would be willing to enlighten me or point me in the right direction? :)

    Thanks so much!
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    If you want advice you need to see a lawyer and tax agent. It might be a preCGT asset, but the shares of the company have changed hands so their cost base might be the market value as of the date of death.
     
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  3. Tony3008

    Tony3008 Well-Known Member

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    Yes, you need professional advice, especially given the amount involved.

    This may have no relevance whatsoever, but we did this in the UK when selling the family home which was owned by the family company. The buyer bought the company rather than the property which saved him a lot of stamp duty (in UK 0.5% on shares v. 3%ish on property). We sold him the property at a fair discount to allow for the latent tax liability in the company. I'm not quite sure how he got the property out of the company without a hefty tax bill (it was carried on the books at [1959] cost) but I gather he did - an offshore company was involved. Of course family members had varying CGT liabilities, but were very happy to get generous payouts in a matter of weeks rather than the alternatives.
     
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  4. thankyou9

    thankyou9 New Member

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    Ok! Thanks for the reply!
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Is it preCGT? Div149 ITAA97 is worth looking at
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Shares of a company could also be transferred without duty in NSW and other states - with conditions, so that might be worth considering. But the buyer will be taking a risk with liabilities of the company.
     
  7. thankyou9

    thankyou9 New Member

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    Thank you for your reply! It sounds extremely complicated.. I will definitely have to get onto a specialist then.
     
  8. Trainee

    Trainee Well-Known Member

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    Would pre-cgt concept apply to both the shares in the company, and to the property held by the company?

    distribution of company shares to beneficiaries via estate is not a cg event.

    land rich provisions?
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Yes there are 2 aspects to consider. But it is possibly post CGT as CGT came in more than 35 years ago now.
     
  10. thankyou9

    thankyou9 New Member

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    I believe so, what implications does that have?
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    CGT only applies to assets acquired post 1985 - I forget the exact date but sometime in August I think.
    First question would be when did the settlement of the property happen? If just after then consider when the company entered into the contract of sale to purchase.
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    There are separate provisions for the transfer of shares for land rich companies as well IIRC which then will attract stamp duty etc.
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Yes in NSW if the company holds more than $2mil worth of land.