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20180404 No gain no loss?

20180404 (Wed)

What do you mean by “No gain No Loss”? And, “Disposal deemed at market value?”

If you study taxation, you would have heard “No gain No loss”. For property which is given as gift from Grandparent to grandchildren, parent to children or between spouses, the law put it as “No gain No loss”.

This means the transacted price is the same as it was first acquired. Take for example, you inherited a bungalow from your grandfather recently (2018). This bungalow was initially acquired (or purchased) by your grandfather some 40 years ago at RM300,000. Now, as it is given to you as gift, the transacted price is taken as “No gain No loss”, ie RM300,000 today 2018. You do not have to value the property, it is taken as worth RM300,000 (which is ridiculous right?).

However, let us say, you have a buyer who offers you RM2mio for this bungalow, and you have decided to sell to him. What would be your gain? How to account for the Real Property Gains Tax (RPGT)? In this case, it is taken as you have acquired the Bungalow now, at RM300,000. You will make RM1,700,000 immediately if you sell at RM2mio. This gain will be levied RPGT. BUT, why is there “Disposal deemed at market value”?

It is when it is given as gift to other parties (not as grandparent to grandchildren, etc.). Which means, if your grandfather gave this bungalow to his niece or nephew, that would be taken as a gift at market value. So, if the market value is RM2.2mio, the gift is valued at RM2.2mio, not RM300,000.

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