An article in the New Zealand Herald today outlines a couples' renovation. They've bared their soal in terms of the budget and that they'll be selling the place - in a national paper. So, you'd have to conclude that they're going to pay capital gains on this project, or will they? It looks like a classic do-up to sell project, but they don't say that. They sold their previous family home to buy this one and they spent $200,000 to renovate it. In the article, Rachel talks about the figures having to stack up - she talks about the resale value. I'd conclude, they always intended to flip it for gain. But, it's the family home - and under Labour's proposed Capital Gains Tax, the family home will be exempt. They've lived in it for more than a few months - yep, they're exempt. But, she's virtually advertising the place for sale by the end of the article.
Now, if they were asked to pay Capital Gains Tax, it would be only fair that the cost of renovations counts towards the expense of gaining any capital to be made at sale - thus the capital gain should be calculated to be only the profit (the amount left over after the expenses: purchase price, maintenance costs, lawyers and real estate agents fees, bank interest on the mortgage, rates, insurance and renovation and repair costs are all deducted.) That's only fair - maintaining a home and improving a home costs.
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