Calculating gains and losses - sale of other housing

In 1999, Kari Nordmann bought a residential property for NOK 750,000. She also paid NOK 18,750 in document duties and NOK 750 in registration fees. She also incurred expenses of NOK 50,000 for alterations considered to be improvements. She has always let out the property, so when she sold it a few years later for NOK 1,250,000, the gain she made was taxable. When selling the property, she incurred NOK 37,000 in expenses for an estate agent, advertising, etc.

Purchase price in 1999	NOK 750,000
+ Document duty	NOK 18,750
+ Registration fees	NOK 750
+ Improvements	NOK 50,000
= Input value in 1999	NOK 819,500

Sale price in the year of sale NOK 1,250,000

– Sale expenses NOK 37,000 
= Output value in the year of sale NOK 1,213,000 

Taxable gain:

Sale price	NOK 1,213,000
– Input value	NOK 819,500
= Gain on the sale	NOK 393,500

 

The gain of NOK 393,500 must be entered in the tax return and will be taxed as general income at the rate of 22 percent, which means that the tax payable on the gain in this example is NOK 86,570.

You’ll find information on calculating gains/losses made on the sale of property that has been inherited or received as a gift here.

Output value is everything you receive as compensation in connection with a sale or other realisation (sale price). This applies regardless of whether it goes to yourself or to others on your behalf. The sale price usually consists of a cash amount that has been or will be paid to the seller, and/or the buyer's takeover of the seller’s debt.

The output value is reduced by costs linked to the sale, e.g. estate agent commission, advertising costs, etc.

The input value consists of the original cost price/purchase price and other expenses attributable to the purchase or take-over of the property. Other expenses could for example include document duties, registration fees and expenses for an estate agent, etc. In addition, improvements made during your period of ownership should be added to the input value. 'Improvements' mean work that alters or improves the condition of the property.

The value of your own work linked to newbuilds or improvements can also be added to the input value. The value of your own work should be set to what it would’ve cost to have work of the same quality performed by others. The hourly rate for non-tradesmen must generally be set lower than a tradesman would’ve charged, e.g. to the hourly rate for unskilled labour. The applicable rates can be found on the Norwegian Labour Inspection Authority’s website. (Note that the value of your own work must be entered as income in the tax return in the year in which the work is performed. Exceptions apply to work that you do on your own home or holiday home in your spare time).

Maintenance expenses can’t be added to the input value. Maintenance, including repairs, is work that’s carried out to restore the property to its previous condition under either the current or a previous owner.

If you intend to sell residential property and the conditions for tax exemption aren’t met, you must perform a gain/loss calculation. Such a calculation is based on the difference between the output value (sale price) and the input value (cost price).

If you intend to sell a property  you’ve owned since before 1 January 1992, you can adjust the input value upwards in accordance with certain rules and rates. For residential property purchased after 1 January 1992, the input value can’t be adjusted upwards in accordance with these rules.

If the property was purchased over a number of years, or improvements were made during 1990 or earlier, each year's incremental increase of the input value must be adjusted upwards separately. For example, if you spent NOK 50,000 on improvements to the property in 1985, you must adjust this amount upwards by the rate for 1985 and add this value to the input value of the property.

The total input value can’t be adjusted upwards to an amount that is higher than the proceeds of sale. The amount of upward adjustment therefore can’t result in you being entitled to a deduction for any loss on the sale; it can only reduce or eliminate any gain.

The input value as of 31 December 1991 is set to the original cost price with a percentage increase in accordance with the following table:

Year of purchase	Percentage rate for upward adjustment of input value	Year of purchase	Percentage rate for upward adjustment of input value
1990	3	1967	200
1989	6	1966	210
1988	10	1965	220
1987	16	1964	230
1986	22	1963	240
1985	28	1962	250
1984	36	1961	260
1983	42	1960	270
1082	50	1959	280
1981	60	1958	290
1980	70	1957	300
1979	80	1956	310
1978	90	1955	320
1977	100	1954	330
1976	110	1953	340
1975	120	1952	350
1974	130	1951	360
1973	140	1950	370
1972	150	1949	380
1971	160	1948	390
1970	170	1947	400
1969	180	and earlier	400
1968	190

Example

In 1979, Ola purchased a house for NOK 500,000. He incurred purchase expenses (document duty, registration fee) of NOK 10,000. In 1985, he spent NOK 50,000 on improvements to the property. A few years later, he sells the property for NOK 1,050,000 and incurs NOK 25,000 in expenses for an estate agent, advertising, etc. Ola hasn’t used the property as his own home in one of the past two years, and the gain will therefore be taxable.

Purchase price                                     1979	NOK 500,000
+ Purchase expenses	NOK 10,000
= Input value 1979	NOK 510,000

 

Sale price	NOK 1,050,000
– Sales expenses	NOK 25,000
= Sale price	NOK 1,025,000

As the property was purchased before 1991, the input value must be adjusted upwards.

Input value for 1979	NOK 510,000
+ Upward adjustment*)	NOK 408,000
=	NOK 918,000
+ Improvements in 1985	NOK 50,000
+ Upward adjustment of improvements**)	NOK 14,000
= Total input value	NOK 982,000

*) For 1979, the input value must be adjusted upwards by 80 percent. This  means that the input value is increased by NOK 408,000 (NOK 510,000 x 80 percent).

**) The improvements were carried out in 1985, and the rate for upward adjustment for this year is 28 percent. This means that the input value is increased by NOK 14,000 (NOK 50,000 x 28 percent).

Taxable gain:

Sale price	NOK 1,025,000
– Input value	NOK 982,000
= Gain on the sale	NOK 43,000

 

The gain of NOK 43,000 must be entered in the tax return for the year of sale and will be taxed as general income at the rate of 22 percent, which gives a tax on the gain in this example of NOK 9,460.

If you sell an apartment in a housing company (usually a housing association or a limited liability housing company) without the requirements concerning period of ownership and occupancy being met, you must calculate any taxable gain or deductible loss. The gain or loss made on a sale must be calculated based on the gross values of the apartment as of the date of purchase and sale respectively. This means that the input value and output value must be corrected for changes in the share’s proportional share of the housing company's assets and debt during the period of ownership.

Before you can calculate the gain or loss, you must calculate two gross values for the apartment: one as of the date of purchase and one as of the date of sale.

Usually, the gross values for the apartment as of 1 January in the year of purchase and sale respectively based on the cooperative's accounts as of these dates will be used as a basis.

The gross value is determined as follows:

The apartment's transfer sum
+ The apartment's share of the housing company's joint debt
- The apartment's share of the housing company's assets*) not included in the housing company's tax value of assets
= Gross value of the apartment

*) The 'housing company's assets' means wealth other than the tax value of housing units (valued according to the rules for residential properties) or assets not covered by the housing company's tax value of assets (holiday home enterprises).

For example, the housing company may have outstanding receivables, securities, cash and bank deposits and unutilised plots of land.

Information concerning the apartment's share of the housing company’s assets will be reported to the Norwegian Tax Administration by the housing company and be pre-completed in the tax return. 

Every year, you will receive an annual statement from the housing company showing the unit owner's/shareholder's share of the housing company's income, expenses and debt for the income year.

When you have calculated the gross values, the gain/loss must be calculated in the same way as for other properties.

Example

In 1999, Ola purchased an apartment for NOK 450,000. He also took over a share of joint debt of NOK 120,000.

The apartment's share of the housing company's assets, such as bank deposits and securities, amounted to NOK 15,000.

He also had to pay NOK 2,000 in transport fees to a contractor, as well as the estate agent's commission of NOK 10,000. During his period of ownership, he spent NOK 20,000 on improvements to the apartment, as well as NOK 50,000 on maintenance.

The apartment's gross value and input value at the time of purchase in 1999 were as follows:

Purchase price	NOK 450,000
+ Share of joint debt	NOK 120,000
– Assets in the housing company	NOK 15,000
= Gross value of the apartment in 1999	NOK 555,000
+ Purchase expenses	NOK 10,000
+ Transport fees	NOK 2,000
+ Improvements	NOK 20,000
= Input value in 1999	NOK 587,000

Several years later, he sold the apartment for NOK 1,100,000. The share of joint debt that the buyer took over was then NOK 90,000, and the apartment's share of the housing company's assets in securities, bank deposits, etc. amounted to NOK 20,000.

At the time of the sale, he had incurred NOK 35,000 in expenses for estate agent fees, advertising, etc. He had always let out the apartment, so the gain would be taxable.

The apartment's gross value and sale price in the year of sale were as follows:

Sale price	NOK 1,100,000
+ Share of joint debt	NOK 90,000
– Assets in the housing company	NOK 20,000
= Gross value of the apartment in the year of sale	NOK 1,170,000
– Sales expenses	NOK 35,000
= Sale price	NOK 1,135,000
Taxable gain:
Sale price	NOK 1,135,000
– Input value in 1999	NOK 587,000
= Gain	NOK 548,000

 

The gain of NOK 548,000 must be entered in the tax return for the year of sale and will be taxed as general income at the rate of 22 percent, which means that the tax payable on the gain in this example is NOK 120,560.