I am assuming the interest is payable/was paid to you due to a...

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    I am assuming the interest is payable/was paid to you due to a clause in the contract stipulating that if the contract is terminated in the manner it has been, that the vendor must pay the purchaser interest on the deposit calculated at a specified rate?

    It is unlikely (though this is largely dependant on the contract) that the interest will be taken into account calculating any net capital gain. Rather, it is likely that the interest will be assessable as ordinary income (just like regular interest you earn from the bank).

    With all that being said you really do need to talk to your accountant who can then look at the actual contract and determine the actual facts of the transaction. This is because people can be very loose with their language and what is being labelled/described as interest may not actually be interest i.e. a lump sum (in excess of the deposit - with that excess being loosely described as interest) paid to terminate the contract as opposed to the contract being terminated due to certain conditions followed by penalty interest being payable on the deposit that was initially paid due to the contract being terminated.

 
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