Loss on properties sold for less than purchase price

[Beano]

When a property is sold for less than the purchase price and also less than the NBV but more than the Land Value

Can you
1: Further write off the building
2: Write off the balance of the chattels
3: Completely write off the building (yellow stickered) which if you can you would have to take a capital gain on the land. (so can you take a capital loss on a yellow stickered building and a capital gain on the land) ?

ps the loss/gain will be locked in the company as the company is not being wound up.

This a genuine loss due to the purchase of the building pre being "yellowed stickered " and pre leaking

[Keithw]

My thoughts that you might like to think about.
Pretty sure this is going to be dependant on the entity you bought it in and the intention at purchase,

Remember that we (NZ) dont yet have CGT so for the average property investor theres no tax on capital gain profits, so neither is there any loss you can claim for capital loss.

If however you / company is trading properties, and the intention at purchase was to sell at a profit (which would be taxable) then it is likely that a capital loss could be claimable.

Assuming you are not trading, and no-one is going to claim that you bought the property knowing it could have problems,
and bearing in mind there is no depreciation allowance for the building,
there doesnt seem any advantage nor disadvantage in writing off considerable building value, and it is easily shown that the building truely has lost value due to being leaky. However, if it could be said to be a capital loss then it couldnt be claimed.
Writing off chattels seems reasonable, however you would need to be able to justify that they didnt have any true value.
A capital gain on the land (which is generally where the gain is made anyway) has no apparent disadvantage to a non trader because its not generally taxable.

It will be interesting to see comments from the accountants here.

[Beano]

My thoughts that you might like to think about.
Pretty sure this is going to be dependant on the entity you bought it in and the intention at purchase,

Remember that we (NZ) dont yet have CGT so for the average property investor theres no tax on capital gain profits, so neither is there any loss you can claim for capital loss.

If however you / company is trading properties, and the intention at purchase was to sell at a profit (which would be taxable) then it is likely that a capital loss could be claimable.

Assuming you are not trading, and no-one is going to claim that you bought the property knowing it could have problems,
and bearing in mind there is no depreciation allowance for the building,
there doesnt seem any advantage nor disadvantage in writing off considerable building value, and it is easily shown that the building truely has lost value due to being leaky. However, if it could be said to be a capital loss then it couldnt be claimed.
Writing off chattels seems reasonable, however you would need to be able to justify that they didnt have any true value.
A capital gain on the land (which is generally where the gain is made anyway) has no apparent disadvantage to a non trader because its not generally taxable.

It will be interesting to see comments from the accountants here.

No intention of re-sale so looks like we cannot claim any further loss
At least the depreciation on the building (claimed in the good old days when there was depreciation) will not need to be written back.
The company has acquired about 65 properties over the last 25 years and sold one (this one) so we probably would not be treated as a trader by the IRD.

[Rosco]

My thoughts that you might like to think about.
Pretty sure this is going to be dependant on the entity you bought it in and the intention at purchase,

Remember that we (NZ) dont yet have CGT so for the average property investor theres no tax on capital gain profits, so neither is there any loss you can claim for capital loss.

If however you / company is trading properties, and the intention at purchase was to sell at a profit (which would be taxable) then it is likely that a capital loss could be claimable.

Assuming you are not trading, and no-one is going to claim that you bought the property knowing it could have problems,
and bearing in mind there is no depreciation allowance for the building,
there doesnt seem any advantage nor disadvantage in writing off considerable building value, and it is easily shown that the building truely has lost value due to being leaky. However, if it could be said to be a capital loss then it couldnt be claimed.
Writing off chattels seems reasonable, however you would need to be able to justify that they didnt have any true value.
A capital gain on the land (which is generally where the gain is made anyway) has no apparent disadvantage to a non trader because its not generally taxable.

It will be interesting to see comments from the accountants here.

That pretty much sums it up!

You would sell the building at it's real value, and sounds like you would have a capital loss. And as you put no depreciation recovery. Just make sure you keep evidence to prove the building value if IRD ever queries why no depreciation recovery.

As you have owned for years, not caught by Brightline. If it was, then brightline loss, but could only offset this loss against future Brightline profit.

Ross

[hawkeye]

But if you have had an insurance claim to fix the building and haven’t used the money to fix it does this need to be added to the value too? Or treated as income? Or something else?

[Rosco]

But if you have had an insurance claim to fix the building and haven’t used the money to fix it does this need to be added to the value too? Or treated as income? Or something else?

no mention of insurance in the original posts!

[Beano]

But if you have had an insurance claim to fix the building and haven’t used the money to fix it does this need to be added to the value too? Or treated as income? Or something else?

Insurance does not pay to have the building strengthen to council standard
There is just no market for leaky yellow stickered buildings hence the loss!
The land content is very small as it is a block of apartments so loss is really attributed to loss in the value of the building