Inland Revenue underlines LAQC concerns

By Andrea Milner

It previously voiced concern in a July 2004 media release that some investment advisors were telling their clients that they can claim a tax deduction by selling their residential property to a LAQC, renting the property back from that company and claiming a tax loss.

The IRD warned in that release that such arrangements would often be considered tax avoidance, meaning the taxpayer would have to pay the tax avoided, a penalty of 100% of the tax avoided and use of money interest.

In some circumstances, shortfall penalties of up to 150% may also apply.