Purchase and resale of some of the property

R

Rasher

Guest
I am considering purchasing 20 acres of land. There is an old house on the property which I do not require and would like to sell it as a separate lot afterwards along with 2 to 3 acres of land.



The current price is 160K. I would expect to get 70K for the old house. What are the tax implications or can I offset the 70K I hope to get against the 160K I paid for the entire lot

Any information appreciated
 
is the 160K for the entire acreage and the house?

if you dispose of the house and land separately there will be a part disposal and only some of the original cost to you will be offsettable against the proceeds received for the house and 2 acres. no indexation is available.

market value of the land at time of sale will need to be assessed as well. you can take for granted that you will be paying some CGT, but this depends on a number of factors.

with firmer figures, your tax adviser will calculate the potential CGT exposure.
 
Thank you for the information Gongey. The 160K is for the land and the house. I only want the land, therfore would plan to sell the house as soon as I can.
I am concerend about the finances I need. I will have to pay tax on the purchase and if I then sell the house I will have to pay CGT on the house sale of 20% unless I can justify that a large percentage of the original cost is the house. Where do you get figures for the market value of land in the area or is the market value what I would pay for it (160K)

The land is poor agricultural land in a remote area
 
on the basis that it is poor agricultural land, would it be hard to justify that most of the cost (160K) is for the house? as you say this will keep the CGT down on the sale of the house but what about later when you may wish to sell your land?

at the time of sale, you should get a valauation of the land remaining by a competent valuer. this would be used in any capital gains tax calculation.

i would speak to a solicitor and tax adviser to give you figures and then you can make an informed decision as to whether it is financially viable for you in the short and long term.
 
If you are buying on the open market now at market value and are expecting to get 70K for the house and land selling it on in what I presume is a fairly short timespan then I think you should be able to make a strong case that 70K or thereabouts of the purchase price relates to the house and smaller parcel of land, allowing you to set off approx 70K of the purchase price against your sales proceeds for little or no capital gain. It might be worth considering getting a valuation at the time of purchase too to show that the house and land accounts for this portion of the purchase price.
 
Thank you for all the information
I will arrange to have the land and hose valued as two lots
 
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