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Nesgroup address: misc.invest.real-estate - Date & Time for the message: Sun, 06 Mar 2005 12:37:08 GMT /

Author of the message: Ronald Raygun

Title of the message:
Re: On UK buying-to-let: funding options

Text of the message:
Doug Ramage wrote:

> "Close reading" is not required to confirm this tax relief for Capital
> Account equity extraction.

What is the mechanism for establishing whether the Capital Account would
be overdrawn?  It is being suggested that the CapAc contains only the
investor's original cash injection, plus profits earned, less drawings,
and that unrealised appreciation does not count as profit in that sense.
Suppose investor buys a 100k property with an 80k loan and 20k deposit.
Cr 20k Capital Account
Cr 80k (liability) Lender
Dr 100k (fixed assets) Property at cost
Ignore routine rental income and expenses by assuming profits are
matched by drawings, which would normally be credited or debited,
respectively, to Capital in the year-end transfer procedures.
Provide for appreciation of 10%.
Cr 10k Appreciation
Dr 10k Accumulated Appreciation
At year end close the Apprec account just as you would close the



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