• Login:
Welcome, Register Here
follow PropertyTalk on facebook follow PropertyTalk on twitter Newsletter follow PropertyTalk on LinkedIn follow PropertyTalk on facebook
Results 1 to 8 of 8
  1. #1
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,876

    Default Trusts & Depreciation Claw Back

    A house is sold by a Trust and the sale involves a depreciation claw back of $18k.

    What's the best way to deal with this sort of situation? Offset against beneficiaries distributions?

    Something else?
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

  2. #2
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,604

    Default

    Quote Originally Posted by Perry View Post
    A house is sold by a Trust and the sale involves a depreciation claw back of $18k.

    What's the best way to deal with this sort of situation? Offset against beneficiaries distributions?

    Something else?
    It is income to the Trust. So it depends what the trustees of the Trust want to do with it and what they are allowed to do under the Trust deed.

    They can generally keep as Trust income or allocate to beneficiaries.

    The best answer will depend on the Trust and beneficiaries circumstances.

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  3. #3
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,876

    Default

    How is depreciation claw back by IRD "income to the Trust?"

    What am I not seeing correctly?

    (I am a Trustee, but it is not 'my' Trust.)
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

  4. #4
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    807

    Default

    Quote Originally Posted by Perry View Post
    How is depreciation claw back by IRD "income to the Trust?"

    What am I not seeing correctly?

    (I am a Trustee, but it is not 'my' Trust.)
    If an asset is sold above the NBV then it is generally considered that it was over depreciated .
    The IRD consider this writeback as taxable income.

  5. #5
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,876

    Default

    Ahhh, right: I see. Thank you for clarifying that.
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

  6. #6
    Join Date
    Dec 2013
    Posts
    102

    Default

    I have been in this situation fairly recently as both the administrator and beneficiary of a deceased estate, which is for all intents and purposes treated as a trust. I am a bit fuzzy on the exact numbers now, but I think we sold a property for around $36k above it's NBV, so there was tax on that 'income' to be paid.

    The options were for the trust to pay the tax at the trust's rate and then distribute the balance to the beneficiaries, or to just distribute that money to the beneficiaries in full with the obligation then on each of them to pay tax at their own marginal rate.

    In our case, all the beneficiaries were each in a different position:
    One based overseas for 30+ years with no NZ bank account or recollection of IRD number.
    One who had recently gone back to work after being on a sickness benefit long term.
    And a couple of wage earners in differing tax brackets.

    In the end, it was easiest for all concerned for the trust to pay the tax before distributing the balance.

  7. #7
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,876

    Default

    Given the diversity of beneficiaries' circumstances that you describe, what you did is understandable.

    But the Trustee tax rate is rather punishing.

    I one situation I was in, the tax rate changed from the deceased's rate of twenty-something percent to 33% on wages accrued and paid later to the estate. Ouch!

    There be ghoulish and rapacious grave-robbers in the law.
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

  8. #8
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    807

    Default

    Note the trust's income statement could show Nil profit but tax is still payable as tax is payable on taxable income which may not be the same as the Trust income
    A business entity profit seldom is the same as the taxable income (as your trust may not use the same depeciation rates as the IRD )


 

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Similar Threads

  1. Trusts On-line
    By cube in forum Finance, legal and tax (NZ)
    Replies: 6
    Last Post: 26-05-2013, 07:49 PM
  2. Depreciate claw back
    By turneg01 in forum Finance, legal and tax (NZ)
    Replies: 5
    Last Post: 25-07-2012, 10:25 PM
  3. Recievers try and claw back rentals from landlords
    By Maccachic in forum Commercial Property (NZ)
    Replies: 6
    Last Post: 06-02-2012, 08:10 AM
  4. Trusts 101: Trusts and Corporate Trustees
    By Bluekiwi in forum Finance, legal and tax (NZ)
    Replies: 8
    Last Post: 04-03-2011, 09:31 AM
  5. Commercial fitouts get depreciation back
    By muppet in forum Commercial Property (NZ)
    Replies: 3
    Last Post: 10-12-2010, 05:11 PM
  6. Real estate trusts blast back to life
    By jenny_pt in forum Regions News (Oz)
    Replies: 0
    Last Post: 05-06-2009, 11:33 AM
  7. Back to back lease options?
    By takeactionguru in forum Property Investment (NZ)
    Replies: 1
    Last Post: 22-01-2007, 12:45 PM
  8. Claw back
    By xris in forum Finance, legal and tax (NZ)
    Replies: 2
    Last Post: 03-10-2006, 11:22 PM
  9. Associated Persons & Depreciation Claw Back
    By xris in forum Finance, legal and tax (NZ)
    Replies: 7
    Last Post: 30-08-2006, 09:15 PM
  10. Claw back of depreciation claimed
    By donna in forum Finance, legal and tax (NZ)
    Replies: 21
    Last Post: 11-10-2005, 04:35 PM

Tags for this Thread

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •