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How do I sell managed funds with investment loan?

Discussion in 'General Investing Discussion' started by miranda, 19th Jul, 2010.

  1. miranda

    miranda New Member

    Joined:
    19th Jul, 2010
    Posts:
    2
    Location:
    Brisbane, QLD
    Hi all,

    This is my first post. I'm not sure of the correct forum so I have posted it in the general forum.

    Say I have an interest only investment loan of $30,000 for managed funds with an establishment fee of $300 capitalised onto the loan. Over the period of 1 year I buy 3 parcels and fully draw down the loan, eg.

    Starting loan balance $29,700
    Parcel 1 - 12,500 units @ $0.80 ($10,000)
    Parcel 2 - 8333.33 units @ $1.20 ($10,000)
    Parcel 3 - 9,700 units @ $1.00 ($9,700)

    Q1. Is it ok to claim interest on the $300 establishment fee for the year.

    Q2. How do I handle the $300 loan establishment fee? Am I supposed to a) increase the cost base of each parcel by about $100, b) increase the cost base of parcel 1 by $300, or c) increase the cost base of the last parcel I sell by $300, d) something else ?

    Q3. If I sell parcel 1 for $12,500, is it ok to only put the cost base ($10,000) back on the loan and keep the $2,500 profit for myself? I realise I will have to pay tax on the $2,500.

    Q4. Rather than paying tax, can I instead choose to sell parcel 2 for a loss at $8333.33, and if so, do I have to put the difference ($1666.67) back on the loan out of my own money?

    Cheers,