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Look Through Company: Revocation, Liquidation & Share Sale Issues 12 August 2014


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Look Through Company: Revocation, Liquidation & Share

Sale Issues 12 August 2014

Questions & Answers

All references are to the Income Tax Act 2007 unless stated otherwise.

Q1: If the shareholders revoke LTC status, then we understand that the company will still have debt remission income. However, under section HB 4(6) the deemed acquisition by the company is immediately after the cessation of LTC status meaning that the debt remission income will not need to be attributed to the shareholders?

A1. It is correct that an LTC will have debt remission when shareholders revoke LTC status (with the resulting income flowing to shareholders under the LTC regime). However, sHB 4(6) does not operate in the manner suggested in the question.

All sHB 4(6) is seeking to achieve is to reset the company’s cost base for tax purposes going forward. When a company’s LTC status is revoked, the company remains an LTC for the income year up to the date of cessation, and becomes an “ordinary” company from the beginning of the next income year. The deemed sale immediately prior to cessation ensures shareholders pick up and account for depreciation recoveries and the like for the year of cessation. The deemed acquisition by the company applies “immediately after the cessation” for the purposes of the following income year when the company is no longer an LTC. These are two distinct income years.

Q2. Can you please confirm that LTC deduction (Page 8 example) is available against the dividend income even though this is exempt income?

A2. Dividends paid by the company post cessation of LTC status are excluded income to the extent provided under the formula in sCX 63. This ensures profits already taxed under the LTC regime are not taxed again as a dividend when distributed. It is important to note the distinction between excluded income and exempt income. Whilst neither amounts are taxable, expenses derived in connection with deriving excluded income are deductible, whereas expenses incurred in deriving exempt income are not. Section HB 12 specifically allows a deduction for previously ring-fenced expenses to the extent of dividends derived from the company post cessation of LTC status be they taxable or excluded income.

Q3. Slide pg2 loans from shareholders is not equity or share capital, but then Phil says later when talking about FA rules, fund LTCs by share capital rather than loans, so that we can then take $$ out of LTC without dividend issues. Could he please clarify?

A3. Our suggestion was that where possible, you should consider funding LTC’s by way of share capital and not debt. Funding by way of debt can lead to accrual income where


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the LTC is insolvent. Funding by share capital will never result in accrual income because shares in an LTC are excepted financial arrangements (“FAs”) and outside the FA rules.

When we refer to funding by share capital, we mean genuine issued and paid up share capital. One cannot lend funds to an LTC and then claim that the loan amount is really share capital or equity. A loan is a loan, and share capital is share capital.

Q4. Financial arrangement rules - what happens if the company is in liquidation then enters LTC regime?

A4. From an income tax perspective, there are no FA issues which arise on entering the LTC regime even if the company is already in the process of liquidation. Entry into the LTC regime is only concerned with whether there are untaxed revenue reserves. If not, there is no entry tax. The FA issues only arise when the LTC status is revoked or the LTC is liquidated. On exit, the same issues arise re financial arrangements as for any other LTC. The main issue in these circumstances will be IRD’s (draft) view that entry into the LTC when liquidation is contemplated potentially constitutes avoidance. However, whether a shareholder can elect a company into the LTC regime once a liquidator is appointed is a matter to be considered under the Companies Act. Section 248(1)(e) provides that from the commencement of liquidation, “an alteration must not be made to the rights or liabilities of a shareholder of the company:” Arguably electing into the LTC regime could be considered to alter the rights or liabilities of a shareholder. This is a company law issue and not one nsaTax has considered – we simple mention it here as a potential issue.

Q5. If shares transfer from husband to wife on the death of the husband, is there a deemed sale or does the wife just step into the shoes of husband at date of death?

A5. Death and assets transfers are dealt with under subpart FC of the Act and an interest in an LTC is included in the definition of property for the purposes of subpart FC. Subpart FC applies to the transfer of an LTC interest on the death of a shareholder to the shareholders executor or administrator as well as the transfer from the executor/administrator to the beneficiary under a Will.

The general starting position with such transfers is that the transfer occurs at market value and is treated as occurring on the date of death in the case of the transfer from the deceased person to their executor/administrator and the date of transfer from executor/administrator to the beneficiary is the actual date of the transaction.

There are a number of concessions/exemptions contained in ssFC 3 to FC 8 relating to the transfer of assets. These concessions depend on who the recipient is (spouse, de facto partner, civil union partner, close relative, or someone else) and depends on the nature of the property (revenue account property, depreciable property, financial arrangement, FIF interest, forestry assets).

The exceptions to the general rule are too many and varied to cover off here, however, generally speaking the transfer of assets to a wife on the death of her husband, is


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treated as a transfer under the relationship property provisions in subpart FB. This was covered in the presentation – no deemed disposal occurs and the wife is treated as holding the shares in the LTC since the date the husband acquired them.

Q6: Re FA, does this include shareholder current accounts? (I'm assuming so.) Are debit current accounts an issue on dissolution? If so, is it prudent to not issue exempt dividends to keep current accounts in credit?

A6: Yes, a shareholders current account can be an FA, although as noted in the Webinar, if the loan is denominated in NZ currency and is interest free and repayable on demand, it will be an excepted FA but only for the lender/shareholder. It will always be an FA for the borrower/LTC. Debit current accounts (where the shareholder owes the LTC) may also cause accrual income to arise. If the shareholder is unable to repay the debt and it is written off in the course of liquidation, accrual income will arise for the shareholder (being the borrower in this case).

Whether a current account is in debit or credit only becomes an issue where the borrower is unable to repay the debt. On that basis, one can’t say it is best to keep the shareholders loan account in credit because if the LTC is insolvent, accrual income can arise for the LTC which flows to the shareholder on cessation or liquidation. The best advice we can give is to be very mindful of the shareholder and LTC’s solvency position, and to keep loan accounts as close to nil as possible.

Q7: Any guidance on time frame between entry in & out of LTC to avoid the 5% top up?

A7: No, but stay tuned in to our website, webinars and newsletters – we will provide an update to the IRD’s positon on tax avoidance and electing in and out of the LTC regime. At this point, the IRD draft QWBA states Parliament’s intention was that companies taking advantage of the 5% tax break would remain trading and in the LTC regime. Quite how the IRD got to that position is beyond us.

Q8: What happens when an LTC shareholder dies in regard to disposal provisions. to the Estate and later to beneficiaries?

A8: Refer to our answer to question 5 above. Generally these transfer are dealt with under subpart FB (Transfers of relationship property) but there are a number of criteria which must be satisfied and these depends on the specific facts of each case.

Q9: Can an LTC borrow to repay share capital and the interest be deductible to the LTC?

A9: Yes. This is essentially refinancing the share capital of the company but we would expect you would need to go through a formal share buyback procedure in terms of completing the relevant Companies Act documents/requirements. Where the share capital has been used to acquire income producing assets, replacing the share capital with debt should enable interest to be deducted.

A series of public rulings issued by IRD in October 2010 related to interest deductibility on funds borrowed to return partnership capital to partners. The ruling concluded that


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provided the partner’s capital which the loan replaces had been used for income earning purposes, the interest would be deductible. Given LTCs are taxed in the same way as partnership’s, this ruling would likely apply equally to an LTC.

Q10: If an LTC has loans from an associated company of a shareholder are these treated the same as if they were shareholder loans, i.e. the income would end up in the loaning company if LTC wound up?

A10: Yes, a loan between an associated company and an LTC is an FA just like any other loan. If the loan is not repaid and instead the balance is written off, forgiven or becomes uncollectable through operation of the law (liquidation) a base price adjustment is required and this will generate accrual income for the borrower. The consequences under the FA rules are no different than any other situation. The quirk here though is that as an LTC, the accrual income flows to the shareholders so it is not possible to “walk away” from the resulting tax liability.

Q11: If a shareholder of an LTC with 5 shareholders - sells his interest leaving 4 shareholders - is there any adjustments required to the LTC status?

A11: No, no adjustments are required. Unlike the old QC regime, there are no new elections required when shares are bought and sold. In fact, there could be a 100% change in the make-up of shareholders but no new elections would be required. Provided the LTC definition is met, nothing changes for the LTC.

Q12: If a LTC is inadvertently struck off and then reinstated, are there issues with remaining in LTC regime?

A12: No, there should be no issues. In this case, the company is generally treated as never being struck off in the first place.

Q13: I have a balance sheet that looks like this - Retained earnings - $1592cr - this arises from trading losses of $65713 and a capital profit of $67305 on the sale of the property. This is balanced by an overdrawn loan account of $1592. The shareholders wish to liquidate the company. Does the shareholder pay tax on the overdrawn loan account?

A13: No, all the LTC needs to do is declare a dividend (which is non taxable) to the shareholders out of retained earnings and credit this to the shareholders current account. This will clear the current account and leave the company with presumably only it’s paid up capital. No tax consequences should arise on liquidation.

Q14: Deemed sale of inventory at selling price or cost?

A14: A very good question. We have assumed you are referring to the situation where LTC status is revoked or lost, and a deemed sale occurs at “market value”, the issue being what is market value – retail selling price or cost, or something else. In our view, we have to look at the context in which the deemed sale occurs. There is a deemed sale of the entire trading stock and such sales would normally occur in a wholesale type transaction e.g. sale of business. Therefore, we consider the correct value to take would be the wholesale price of the stock which is likely to reflect cost price. The


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question we ask ourselves is “if I was selling all my stock in a single sale transaction, what would I get for it?” We think the answer to that is cost/wholesale.

If the question relates to the disposal of shares in an LTC, and the $50,000 de minimis concession doesn’t apply, you would need to break down the actual consideration between the various items being sold i.e. all assets, liabilities, rights and obligations – effectively an apportionment exercise.

Q15: For overdrawn shareholders current accounts in a LTC, do we have to charge interest (@ IRD prescribed FBT rates)?

A15: Generally no. We only need to charge interest on loans for tax purposes to avoid deemed dividends or FBT arising. Because an LTC is not a company for tax purposes, there can be no deemed dividend on money lent by the LTC to shareholders or associates. However, there is still the possibility of FBT where an employment relationship exists. Furthermore, I can confirm that a working owner is not considered an employee for FBT purposes and therefore no FBT issues can arise.

Q16: Does the IRD need to be notified if the LTC status is lost?

A16: Yes. Obviously if we are revoking the LTC status voluntarily the IR896 form will be filed and IRD will be notified. However, in the situation where LTC status is lost (for example because the 5 or fewer shareholder test is breached) we understand there is no form to file. However, the company’s tax return for that year will be an IR 4 and not an IR 7 so IRD will need to be notified. This can be done by way of ordinary correspondence.

Q17: Why does revocation of election create the tax bill? Our understanding was that you could revoke however as long as the company continued there would be no tax cost?

A17: Unfortunately your understanding is incorrect. This has never been the case. Section HB 4(6) makes it clear that a deemed disposal occurs when LTC status is lost or revoked. It states –

Cessation due to revocation or otherwise

(6) A person is treated as disposing of all of their owner's interests for a look-through company to a single third party for a payment equal to the interests' market value, if the look-through company ceases to be a look-through company because of a revocation or otherwiseJ

The deemed disposal potentially creates income and this flows through to shareholders.

We are aware that there are alternative interpretations on this issue. Some suggest that because an LTC is “transparent” a loan between the shareholder and LTC can be ignored – the loan is essentially from the shareholder to the shareholder. We strongly disagree with this interpretation. In our view, this interpretation ignores the LTC altogether and this is not the intention of the regime.


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Another interpretation which is doing the rounds is that no accrual income arises for an insolvent LTC if it revokes its LTC status, but accrual income does arise if the LTC is liquidated. I understand this view was also was expressed by Peter Loerscher, Principle Advisor International, IRD, at a Whangarei seminar this week but in exactly what context I’m uncertain as I wasn’t at the seminar. However, I’ve been informed it was suggested as being the correct interpretation of the law.

The interpretation is that because the company remains in existence and the loan remain on foot post cessation of LTC status, nothing happens from a tax perspective. This interpretation is contrary to IRD’s own policy statements and the legislation. What then is the point of sHB 4(3) - permanent cessation/liquidation – and sHB 4(6) – revocation - if not to deem a sale? Baffling to say the least. Section HB 4(6) deems a sale of the owner’s interest at market value to occur on revocation. It states –

A person is treated as disposing of all of their owner's interests for a look-through company to a single third party for a payment equal to the interests' market value, if the look-through company ceases to be a look-through company because of a revocation or otherwiseJ”

The legislation couldn’t be made any clearer than that. Market value for a debt owed by an insolvent company can only be nil and provisions in the FA rules dealing with factors influencing market value such as a decline in creditworthiness (sEW 39) do not apply in this case.

In our view, this interpretation is just plainly incorrect and we struggle to reconcile this view with the policy intent behind the LTC regime. In addition, we have correspondence on file from a Senior Policy Analyst at IRD who we understand was intimately involved in the design and implementation of the LTC regime. That letter confirms our interpretation. It states -


When an LTC (as debtor for a financial arrangement) ceases to be a look-through company, whether by permanently ceasing business or look-through revocation of the LTC election, sections HB 4(3) and (6) require this to be treated as a disposal of the financial arrangement at market value. The market value will depend on the situation of the LTC and its ability to repay the loan; I would suggest that, for example, where an LTC is on point of insolvent liquidation the market value of the disposal is likely nil.

This base price adjustment may result in the owner(s) having assessable income under section CC 3 (and section CB 32B); this is the expected outcome, as under the financial arrangement rules the ‘LTC’ has income from a base price adjustment, and under the LTC rules this income is attributed to the owners.

Where section HB 4(6) applies, the base price adjustment made by the LTC as borrower effectively crystallises the position at the point it transfers out of the rules. Income may arise under the financial arrangement rules for the shareholders, in the same way as for any other assets that are deemed to be


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disposed of; for example there may be depreciation recovery income on the deemed disposal of depreciable property.

It is acknowledged by IRD that accrual income can arise in this scenario but they appear to be open to reconsidering the position. This issue is on the IRD’s agenda for review and we are all hopeful of an amendment to the law to bring LTCs and shareholder loan accounts into line with a partner’s capital account in a partnership. The intent is to tax LTCs in the same way as partnership but this is one obvious difference. For now though, there is an issue, and we have to deal with it one way of the other.

Q18: What happens when LTC shareholders consistently pay off debt of the LTC and these transactions happen in the shareholders current accounts - surely there is potential for this to increase the credit in the shareholders accounts?

A18: We are not entirely certain what this question is aimed at. We agree that if the shareholders are advancing funds out of their own pocket to the LTC, then this clearly increases the shareholders current accounts. The issues relating to the FA rules and my comments about funding LTCs by way of share capital rather than debt, were aimed at avoiding the situation where an LTC becomes insolvent (debts exceed assets) which creates the situation where accrual income can arise. If you are confident the LTC will never be insolvent, then debt funding will be okay. However, if you are wrong and for some reason the LTC does end up with debts greater than assets, you have a problem which is then difficult to fix due to the funding structure and IRD’s current (draft) view on associated avoidance issues.

Q19: When a company exits the LTC regime and is continuing indefinitely, are the shareholder current accounts treated as income to the shareholders upon exit of the regime? Or since the company is continuing, they simply remain in place and carry on as usual?

A19: The answer depends on whether the LTC is solvent or insolvent. On exit from the LTC regime, a deemed disposal occurs at “market value”. If the LTC was insolvent, the market value of the shareholder current accounts will be less than the amount owed and would therefore give rise to accrual income under the FA rules. However, if the LTC is solvent, the market value of the shareholder current accounts is likely to equal their face value. In that case, no accrual income arises under the base price adjustment. See also our response to question 17.

Q20. Phil mentioned that a transfer of shares due to the death of a shareholder would probably be treated the same as a relationship property settlement where it doesn’t trigger a deemed change of ownership.

We have some LTCs that have ceased trading (rental properties) so the only items left are the $100 odd share capital, large credit balances owing to the shareholders and negative retained earnings. Given that the issue of new share capital may yet be deemed an issue by the IRD if its only purpose is to avoid the debt remission income, do you think the following option is feasible?


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The shareholders leave their shares and any loans to a charity in their will and just keep the company open. Upon their deaths the shares will transfer without issue. The charity could then let the company be struck off or formally wind it up. Although debt remission would be triggered, no income tax would be payable since the shares are now owned by a charity.

A20. This may well work provided you can find a charity which is happy to take ownership of the shares in an insolvent LTC. Also, shareholders in an LTC must be individuals or a trust. As not all charities are trusts, you will need to be careful in selecting the entity. I think there are probably easier ways to deal with the issue, but again, stay tuned – who knows what the IRDs response will be to the avoidance issues or the treatment generally of shareholder loan accounts.

Q&A: 26 August 2014 Rerun

Q21. What is your view on statute of limitations and debt remission by shareholder loan not being refreshed and triggering debt remission (in the case where we leave a LTC where we do nothing?)

A21. A base price adjustment occurs in relation to a financial arrangement when “all remaining payments under the arrangement become irrecoverable or unenforceable through the lapse of time.” (sEW 29(12)). Where a debt becomes unrecoverable by virtue of the Limitation Act 2010 (generally six years in relation to debt), a BPA is required at that point and the usual tax consequences flow – refer above.

Q22. LTC issues share, the capital is paid up by cash. The cash is then used to repay the shareholder current account. What would be a sensible time to wind up the Company after this?

A22. If capitalising debt in this manner was considered tax avoidance, there is no time frame after which it would be considered sensible to wind up the company. However, IRD appear to accept that the subscription of shares for cash and the subsequent repayment of debt with cash does not amount to avoidance (see draft QWBA issued June 2014). In our view, there is far less likelihood of IRD reviewing the situation where cash has flowed and therefore a liquidation soon after the capitalisation should not be an issue. That said, the longer you leave the liquidation the better.

Q23. Is the $20,000 tax an estimate of the tax payable on the $60,000?

A23. Yes - $60,000 x 33% = $19,800 or ~$20k

Q24. Capitalise debt. Issue new shares or is a call on existing shares sufficient given Companies Act 1993 shares have no 'par' value.

A24. Same as Q22 above. Provided the Companies Act allows for a call on shares already on issue, the consequences and issues are the same. I would have thought there still needs to be an uncalled component in relation to the share to achieve this.


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A25. If an LTC has sold its asset leaving s/holder loan that can’t be repaid, then increases share capital via cash exchange to repay the s/holder loan. Doesn’t the IRD question the reason for increasing the capital, if the company is shut down shortly afterwards?

A25. Yes, they may well raise this as an issue. However, per Q22 above, IRD appear to accept cash flows as a valid means of capitalising debts.

Q26. I have a company that has sold the business held in the LTC. There is a large Shareholder loan balance still sitting in the balance sheet. If the LTC liquidates does the loan become income of the LTC? The bank loans are also still in the LTC - can they still claim the interest on these loans going forward even though no assets held?

A26. Yes, the loan balance will become income of the shareholders on liquidation assuming the LTC cannot repay the loan. If the company was not liquidated but remained in the LTC regime, continuing deductibility of interest hinges on a nexus with income generated (in any income year) or the carrying on of a business. Provided the funds were originally borrowed for an income earning purpose, interest deductions should continue but probably only for a limited period of time. Refer FCT V Brown 99 ATC 4242 (HCA).

Q27. My client, a Shareholder of LTC, has sold the rental property held in the LTC to himself. The funds will repay the bank loans in the LTC and the Shareholder loans. What happens to the balance of the sale proceeds since he sold to himself?

A27. Because the LTC has sufficient funds to repay the shareholder and bank loans, no accrual income arises. The surplus funds can be distributed to shareholders on a tax free basis.

Q28. For a $60k share issue; If $60k of funds not available and has say $10k can they put $10k in six times (withdrawing it each time)?

A28. Yes, this should be possible. A single issue of shares for $60k with the amount paid in 6 instalments of $10k. Remember though, banks may provide a same day or overnight banking facility to enable the subscription and loan repayment to occur in one tranche.

Q29. Are QC losses carried forward into the LTC regime deductible on revocation or liquidation?

A29. QC losses are allowed to the shareholders where the QC transitions to an LTC provided the criteria in sDV 23 are satisfied.

Q30. Is there any way to remove or otherwise exit a shareholder whose effective interest has been diluted significantly through capital contributions (where concessions are not available)?


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A30. Where a shareholder’s interest has been significantly diluted it is likely a sale of their interest would fall below the $50,000 de minimis concession in sHB 5. For example, if a shareholder’s interest has been diluted to 1%, taxable income arising on the sale of shares would need to be >$5m in order for the shareholders share to be greater than $50,000 ($5m x 1% = $50k). Otherwise, there may be some difficulty in avoiding income arising.

Q31. When capitalising loans to LTC's is there any requirement to pro-rata capital contributions based on existing effective interest, or can effective interest be adjusted through additional capital issues?

A31. No there is no requirement to pro rata capital contributions but if it is desirable to keep shareholding percentages unchanged, pro rata contributions would be required to ensure no one’s interests are diluted.

Q32. I've heard a few different answers now. If a LTC shows an overdrawn shareholders current account does it have to charge low interest loan rates (FBT rates) on this loan and show as income (which obviously flows through to the shareholders tax return)?

A32. No. Interest need only be charged to overcome FBT or deemed dividend issues. An LTC is not a company for tax purposes and is not capable of paying a “dividend” for income tax purposes, therefore a loan by the LTC can’t give rise to a deemed dividend. FBT is generally no longer an issue because most LTC shareholders are not “employees” for income tax purposes (refer para (c) of the definition of employee in sYA 1). There may be situations where an FBT liability can still arise but these will be rare.

Q33. Revocation: We have an LTC which is a trading farm with livestock and significant building and plant assets which have been depreciated. The LTC wants to revoke its LTC status and continue trading as a farm as a normal company. Am I right in thinking that livestock and assets must be sold at MV and hence any depreciation potentially recovered? The $200,000 asset depreciation recovery exclusion doesn't apply in this scenario does it? How is it best to show this sale at MV in the accounts? Is it best to setup a new set of accounts for the "new" company with the MV as its base?

A33. Yes, livestock and depreciable property may give rise to depreciation recovery income. Correct, where an LTC ceases to be an LTC the concessions in HB 5 to HB 10 do not apply. In terms of how best to disclose this in the financial statements we haven’t put a lot of thought in to this. Our gut feel is that starting a completely fresh set of accounts/GL would not be wise as the history of the company’s LTC status may be lost or forgotten. For example, certain post LTC dividends are not taxable and there would be nothing in the “fresh” set of financial statements to indicate the status of such distributions.

Q34. Do the FA rules (or did they) apply to LAQC's in a similar position?

A34. Yes, the same issues noted in the webinar applied to LAQC’s. The benefit of the LAQC regime was that we could retrospectively elect out before any tax liabilities were


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created and the LAQC regime did not have a “deemed sale” consequence on exit from the LAQC regime. This is a “loop hole” the Government have successfully and deliberately plugged with the introduction of the LTC regime.

Q35. Company 1 is owned by Shareholder A 55% and Shareholder B 45%. Company 2

is owned by Shareholder A 50% and Shareholder B 50%. Company 1 is a normal company and Company 2 is an LTC. Company 1 has advanced large amounts of money to Company 2. We realise that interest should be charged and any discharge of the debt will give rise to taxable income which the shareholders of the LTC Company could be personally liable for. If we revoked the LTC status and amalgamated both companies could the intercompany debt be extinguished without any adverse tax effect?

A35. Revocation and amalgamation will not necessarily solve the issues here. The act of revoking crystalises the tax liabilities and any amalgamation which occurs after that does not change this fact.

If on the other hand an amalgamation occurred at the time the company remained an LTC, the outcome may differ depending on whether the LTC or the ordinary company was the continuing company. Having reviewed the legislation briefly, there is no obvious answer to this question. It appears a reasonably complex issue and not one we have had the need to consider thus far. Unfortunately a reply would require a reasonable level of research on our part and is outside the scope of this Q&A.

Q36. If we are capitalising up the shareholder loan accounts in an LTC by cash, often those LTC’s have already closed their bank accounts. Would it be suffice to channel the cash say through our Trust account in the name of the LTC?

A36. Yes, there should be no issues in utilising an accountant’s or solicitors trust account for this purpose.

Q37. A LTC client has recently sold the residential rental property it owned for many years at a price which is inadequate to enable repayment of all of the bank loans and the shareholder advances, since the property was in an area not attractive to purchasers.

The company plans to gradually repay the balance owed to the Bank over time – the shareholders will continue to put funds in to enable this. The shareholders have reasons relating to securities for doing this – when it is repaid this will free one property over which there is a personal guarantee presently. Can the interest incurred continue to be treated as a deduction if the shareholders still have sufficient owner’s basis? This point was discussed briefly towards the end of the webinar but I’m not sure how it applies in this case.

A37. This question is one of interest deductibility and not specific to LTCs and unfortunately the answer is not straight forward either as it depends on the facts of each case. Refer to our response to question 26 and the Australian tax case of FCT v Brown. In that case, the court allowed a deduction to continue post cessation of the business activity


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but only for a limited period of time until the loan was refinanced/extended. Needless to say, the IRD are not particularly fond of this case.


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