How to record the ownership of the Joint Venture in the accounting records ?

[TAMI]

Dear Members ,

A quick question , my company is holding a joint venture agreement with an investor for a property . The property is under the investor name and so is the mortgage. My company has a trust agreement and we are the co-owner of both the property and liable for the mortgage . Since we are co owners how should this be reflected on my investor accounting, do I record the ownership for my investor as 100% or 50% ?

Your thoughts are highly appreciated

 

[Matt Crowley]

Property title is split into two parts: legal and beneficial.



Legal: title and mortgage



Beneficial: ownership of income and profits



What is the split on beneficial?

 

[TAMI]

Hi Matt , thank you for your quick respond . The beneficial split is 50-50


Do you mean that in the legal ( title and mortgage ) section it will be recorded to the investor 100%


And in the beneficial( ownership of income and profit ) section it will be recorded 50% for the investor?



thank you

 

[Thomas Beyer]

You issue a formerly quarterly, and certainly an annual statement showing income, losses and/or assets & liabilities split according to the agreement (presumably 50/50).



You could issue a T5013 (statement of partnership income or loss) or you could just issue a SimplyAccounting statement showing rents collected and expenses paid, and the annual mortgage balance.



You need to break out land, improvements and chattels separately as they have different depreciation schedules, land usually none, building over 25 years (i.e. 4%/year) and chattels over 10 years (i.e. 10%/year) which allows you to reduce or avoid taxes while holding.

 

[TAMI]

Thank you Thomas , the first part of your respond is very clear . Could you please tell me more about `chattels over 10 years (i.e. 10%/year) which allows you to reduce or avoid taxes while holding`

thank you

 

[Thomas Beyer]

Let's say you buy a house and chattels ( fridge, stove, dishwasher, laundry machine perhaps ) are worth $1500 you can deduct $150 a year from taxable income.