Brian and Nancy Wigglesworth
3 Wigglebottom Lane
Darlington
Hawkes Bay 1st September 2014
Dear Mr and Mrs Wigglesworth
Thank you for coming and asking me for tax advice last week. I understand you are wishing to subdivide 4 plots of land in your property and sell the 4 plots after the subdivision. As I mentioned last week that there may be some tax charges that may apply if you decide to sub div ide the land and sell it, as the land is part of the business. I will outline the entire tax basis that may apply to you.
Facts that I know off about your circumstances from our meeting:
The land was an inheritance from brians family 12 years ago
Changed in to a company six years ago from private
The company took a loan. The loan was for his sisters so that she will not have any shares in the company due to the inheritance given
Brian works as consultant for wiggle farms ltd for young farmers in the district
Brian and Nancy are both equal shareholders of the company
Nancy works at the waipukurau health centre and earns wages
Farm has farming activities, sheds animals, five houses, four for farm workers, one for private use.
The company owns the land
Sections will be sold for lifestyle
Brian and Nancy are wishing to sell the sections as they are empty and make a bit of money out of it Subdivision will happen this year and sold in 2015
Asking price for each subdivision is $300,000
Brian and Nancy have no family who are associated with Developing, building etc.
Expenses will include fencing services etc.
There will be no constructions work on the 4 subdivisions
Note under Deduction General Limitation DA subpart 2(2) (School fees for boarding schools in Hastings) Brian and Nancy cannot deduct an amount of expenditure or loss to the extent it is of a private nature.
Tax issues
All income earned from the company is taxable income.
Deduction is allowed if there are any improvements made to the land except it is not private use.
Brian and Nancy’s income is fully taxable and cannot be deductible
Nancy and Brian can claim interest deductions for the loan given to Brian’s sister under the section DB subsection 7, as the loan was
