A taxpayer receives rental income on a property that is not in her name. Does she have to declare the income, if so can she deduct the interest on bond that is not in her name?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
The fact that the taxpayer “would not be able to interest on the bond, as the bond for the property is not in her name” is not reasonable grounds for “tax position” taken with respect to the income derived from the property. The general principle is that a deduction can only be made if the taxpayer carries on a trade and then the deduction can only be made against the income derived from the trade. The mere fact that the individual receives the rental income, whilst not the owner of the property, doesn’t mean that she is carrying on a rental trade. She has also not incurred an expense – a crucial requirement of section 24J(2). We accept that property is not jointly owned.