Unit Trust property sale

selling a property in a unit trust

say you have a unit trust who bought a property for 100k, 5 years later its worth 200k and you sell it.

So the unit holders have 100k gain, how would this then be distributed back to the unit holders?

Would they distribute the entire profit and then cancel the units (as they are now worth nothing?) or would they distribute the value of the capital gain and then pay the initial cost for the units. Or as only 100k of the units would be taxable, do they only have to distribute 100k and they can have 100k of cash just sitting there to do as they please??

Im just a bit confused...

 

Start with the Trust Deed.

Generally...
The capital gain is distrubuted, so the Unit holdres recieve $100K of the $200K settlement proceeds.

If the unit holders want to remain in the fund, then that's all. If they want out then they redeem their original units for $100K

 

thanks....

would anyone know how differently this would work with a hdt?

 

Please explain 'hdt' - do you mean hybrid discretionary trust?

Capital gains are typically taxable in the hands of the beneficiaries - regardless of the if the trust was a discretionary trust, unit trust or hybrid.

What Matt said.

 

yes hdt is what i mean

it was more in a question of if it was a hdt you could sell the asset, and have 200k, then (assuming the deed) says it units must be bought at market value, you would pay $2 for every unit issues. Then it would turn into a DT with no units issued.

The benefit to this is you could get the 50% discount even though the asset wasnt held for 12 months (because the units are though)

thats my thinking anyway, could be very wrong though....

 

Hi Dave

You really need to check your Trust Deed. From the HDT I have seen, the discretionary nature of the trust is dependant on who owns the units. So under the last scenario you noted, if you were to buy back all the units, the trust would no longer exists.

One matter you may like to consider is that if your investment has finished, you just may want to unwind everything and let this venture close, so the ATO then has only 5 years to look at this entity.

You may just want to start up a new structure for your next venture.

Speak to your accountant and financial adviser to see if you can use losses or super contributions to reduce any CGT.

Warren