Let battle for chattels begin

"Chattels" include such things as electrical wiring, plumbing, partition walls (any wall not holding up the roof), the drive, letterbox, fencing and so on, in addition to the traditional chattels such as carpets, curtains and light fittings.

The depreciation of these "chattels" has a significant effect on the investor's tax and, for several years after purchase, can result in a refund from Inland Revenue.

The astute investor then appropriately attributes the sale price to the land, building and chattels in the sale-and-purchase agreement, escaping with no or minimal tax on recovered depreciation.

As a taxpayer I am astounded that IRD should have allowed this situation to arise. But as an owner of two investment properties, I am asking myself, why shouldn't I take advantage of this apparent laxity?

A. Perhaps because you don't want to run the risk of battling Inland Revenue.

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