Mark McLaughlin looks at property options and the importance of establishing the tax consequences of property agreements.
In property transactions, an option agreement will sometimes be made between an individual property seller and a prospective buyer.
You have the option…
An option is broadly a legal agreement for an offer to be kept open for a specified period. For example, an individual might agree to keep an option open for the buyer to purchase a property. During the specified period, the buyer can decide whether to proceed with the property purchase. If they choose not to, the offer lapses; but if they exercise the option, the contract becomes binding.
For tax purposes, an option is an asset for capital gains tax (CGT) purposes. For options over property, the grant of an option to acquire the property is generally treated as the disposal of a
