A family home is inherited and then rented out.
What are the future tax liabilities down the track if sold within 10 years?
Is the increase in value taken from the time of inheritance?
With a sole beneficiary a valuation may not have been done.
Is this something that needs doing at this point?
Thanks

dutchess46 - 2021-09-14 13:12:00

Well the brightline test,. Pay tax on your profit and pay tax on your earnings. Pop

msigg - 2021-09-14 13:54:00

Yes but how is profit calculated if you dont have a starting purchase price?

dutchess46 - 2021-09-14 17:36:00

How long ago was the house inherited?
The brightline test that was in place when it was inherited will be the one you go by.
10 years will apply to land acquired after 27 March 2021,
5-years 29 March 2018 but before 27 March 2021

maddie44 - 2021-09-14 17:41:00

Inherited property is exempt from the Bright Line.

sparkychap - 2021-09-14 18:09:00

Has just been settled now so 10 years.
What I am wondering is how the starting value is arrived at to work out an increase in value that is taxable.
If I understand it right the tax is payable on the increase in value from purchase til its sold.

dutchess46 - 2021-09-14 18:13:00

Thanks sparky. But what happens if its then rented and sold at a later date?

dutchess46 - 2021-09-14 18:15:00

dutchess46 wrote:

Thanks sparky. But what happens if its then rented and sold at a later date?

As long as ownership hasn't changed, its exempt. However, say two people inherit a property, then one sells their share to the other no tax is payable on that half. But the other now 100% owner then sells a few years later and has to pay tax on the 50% they bought from the other half.

The renting out is a red herring. The fact is was inherited is not.

Edited by sparkychap at 6:21 pm, Tue 14 Sep

sparkychap - 2021-09-14 18:19:00

Thanks. Friends came from lawyers after the inheritance was settled yesterday with the belief that they now cant sell it for 10 years.
What advice was given or misunderstood I don,t know.
cheers

dutchess46 - 2021-09-14 19:29:00

Send them here:

https://www.ird.govt.nz/property/buying-and-selling-resident
ial-property/the-brightline-property-rule/exclusions-to-the-
brightline-rule

sparkychap - 2021-09-14 19:33:00

dutchess46 wrote:

Thanks. Friends came from lawyers after the inheritance was settled yesterday with the belief that they now cant sell it for 10 years.
What advice was given or misunderstood I don,t know.
cheers

Best advice is , don't continue with the person giving that advice.

Inheritance was (has been) exempted all along.

smallwoods - 2021-09-14 20:36:00

smallwoods wrote:

Best advice is , don't continue with the person giving that advice.

Inheritance was (has been) exempted all along.

However, if you read the post properly the poster acknowledges she doesn't know what advice was given. For all we and the poster know the advice from the lawyer yesterday might have been entirely correct.

It is odd that early yesterday afternoon the poster was asking in a muddled way about the same issue. If anyone is confused here it's her. I don't believe for a second that the friend thinks they cannot sell for 10 years.

johnston - 2021-09-14 22:40:00

johnston wrote:

However, if you read the post properly the poster acknowledges she doesn't know what advice was given. For all we and the poster know the advice from the lawyer yesterday might have been entirely correct.

It is odd that early yesterday afternoon the poster was asking in a muddled way about the same issue. If anyone is confused here it's her. I don't believe for a second that the friend thinks they cannot sell for 10 years.

Only going by this post!

"Thanks. Friends came from lawyers after the inheritance was settled yesterday with the belief that they now cant sell it for 10 years.
What advice was given or misunderstood I don,t know.
cheers

Quote
dutchess46 (1400 1400 positive feedback) 7:29 pm, Tue 14 Sep #9"

smallwoods - 2021-09-15 08:47:00

sparkychap wrote:

Inherited property is exempt from the Bright Line.

correct

spead - 2021-09-18 12:32:00

Gosh I see you’re in New Plymouth - hope your friends didn’t get that advice from the law firm I work for

sarahb5 - 2021-09-26 22:19:00

sarahb5 wrote:

Gosh I see you’re in New Plymouth - hope your friends didn’t get that advice from the law firm I work for

I don't believe that advice was given. The op says their friend believes that to be the case. Of course the op does not know what advice was given or if the friends understood the advice or if the op properly understood the friends. The friends might also have purposely misled the op.

johnston - 2021-09-27 08:07:00