Part 2b – Negative GearingJake while talking to a friend (Max) at a party...

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Accounting

Part 2b – Negative Gearing
Jake while talking to a friend (Max) at a party is informedabout a topic called “negative gearing”. Tax advantages werediscussed so Jake is seeking your advice. He was also told aboutpotential changes should there be a change in Government. In yourown words, explain “negative gearing” to Jake and the potentialchanges that may occur. In your own words, students should discussthe potential tax benefits for someone earning $100 k per year.
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DEFINITION of Negative Gearing Negative gearing is a form of financial leverage and is commonly used in the context of property investing Negative gearing involves borrowing money to buy an income producing asset such as a rental property when the asset wont be able to produce enough income to cover the loan payments cost of maintenance interest or depreciation in the short term Ideally the asset will eventually produce enough money to cover those costs These losses can be beneficial to the owners tax bill in certain instances Depending on the investors home country the shortfallbetween income earned and interest due can be deducted from current income taxes Countries that allow this tax deduction include Canada Australia and New Zealand Investing in such a way might make sense in instances where large capital gains are expected at the time of sale which make up for the See Answer

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In: AccountingPart 2b – Negative GearingJake while talking to a friend (Max) at a party is...Part 2b – Negative GearingJake while talking to a friend (Max) at a party is informedabout a topic called “negative gearing”. Tax advantages werediscussed so Jake is seeking your advice. He was also told aboutpotential changes should there be a change in Government. In yourown words, explain “negative gearing” to Jake and the potentialchanges that may occur. In your own words, students should discussthe potential tax benefits for someone earning $100 k per year.300 words