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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

    19th Jul, 2010
    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?