Linked heavily to my question re losses recently.
An individual buys a property with a view to obtaining planning for the site to knock down the existing dwelling and build a bigger one for resale in a very exclusive area.
Property is purchased with mortgage, planning obtained. Site is left dormant for a while then the original house is partly demolished. Simultaneously the bank pull his borrowing facility and he has all on to avoid bankruptcy. Work on the site ceases and eventually a repossession occurs.
The intention was to trade but really unsure whether actual trade exists here. I've looked briefly at the badges of trade but would appreciate a bit of feedback please.
Property was purchased in 2009. Repossession in 2014.
Replies (9)
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Question?
I think you have spent so much time setting out the background facts in detail that you haven't got round to your question.
I think he is saying is there a trade... ?
In my opinion no....
Therefore any loss is useless
Ask yourself ...
... if the project had been successful, how would it have been taxed? Not necessarily conclusive, but a starting point.
I'm with BKD on this, look at what would have happened if there was a successful sale.
It sounds to me, on facts given, that a case for a trading loss could be established.
,
But there wasn't?
I'm with BKD on this, look at what would have happened if there was a successful sale.It sounds to me, on facts given, that a case for a trading loss could be established.
,
But there wasn't? Where is the trade?
Exactly
There was a trade for sure. If you opened a shop in a high street selling apples and didn't sell a single apple that wouldn't mean you didn't have a trade. The only thing here is that there was only ever a single item to be sold.
And you could also readily argue that the repossession itself amounted to a sale - assuming it was in exchange for the debt being forgiven.