Thursday, 9 October 2014

Expenses that can be deducted during sale of capital asset

There are several expenses that are incurred in the process of selling a capital asset and the importance of this head is that one has to see whether these are allowed as a deduction from the sale price while calculation of the capital gains or loss is made. There are several genuine expenses that are incurred with the whole process and hence it is essential to ensure that this is considered in the entire working so that the right amount is available for the purpose of tax calculations. Here is a close look at the issue and the items that would be allowed as a reduction from the sale value.

Brokerage or commission paid on transfer
This is one of the most common expenses that is incurred at the time of the transfer due to the fact that in many cases it is not possible to sell the property or the capital asset without the help of a broker or an intermediary. There would have to be some payment of fees to the broker at the time of the transfer of the asset and hence this would be a part of the total receipt that would have to be reduced in order to arrive at the final figure. There might not be a specific broker who has been used for this purpose but it could be that help has been taken from someone else and when the transaction has been completed and then there could be an amount of commission that is paid which would also be covered under this reason.

Cost of stamp or registration fees
There are different ways in which the sale agreement could be structured. At the time of the transfer of the property there would have to be stamp duty or registration fees that have to be paid to the government for the change of name and other details in the property. When this is the case then the next thing to look at is who is going to bear these charges. It could be that the seller is bearing the charges in which case the amount can actually be claimed as a reduction from the amount of the total receipts.

Travelling expenses
It could also be that the individual who holds the property is living at some other place and hence would have to travel to the place where the property is located for the purpose of completing the requirements of sale. This would ensure that there are some amounts that are actually spent here which would actually be for the purpose of the transfer process. If this is the case then it would be considered as an amount that is spent for the property and this can be reduced from the amount received in the process of calculation of the gains.

Litigation expenses
There are different kinds of expenses that are incurred in the entire process of completing the sale of the property and there are situations where there might be some expenses incurred as litigation expenses. This could be for a property where there is a compulsory acquisition so there is some dispute about the valuation and this has been incurred in the process of getting a better compensation or for highlighting a point that has been missed in the calculation. This might also happen in case there is some dispute over the property valuation with the buyer and hence this reason has to be taken carefully in to consideration. The whole idea is that the amount should have been spent as a part of the whole process of transfer.

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