Calculating gains and losses - sale of plots of land

In 1999, Kari Nordmann bought a plot of land for NOK 750,000. She also paid NOK 18,750 in document duties and NOK 750 in registration fees. She sells the plot several years later for NOK 1,250,000. 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
= Input value in 1999	NOK 769,500

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

– Sale costs 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 769,500
= Gain on the sale	NOK 443,500

 

The gain of NOK 443,500 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 97,570.

The input value consists of the original cost price/purchase price and other expenses linked 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. In addition, improvements made during your period of ownership should also be added to the input value. 'Improvements' means 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 plot to its previous condition under either the current or a previous owner. See more examples of the distinction between maintenance and improvements.

If you intend to sell a plot of land, you must perform a gain/loss calculation where you look at the difference between the output value (sale price) and the input value (cost price).

If you intend to sell a plot that you've owned since before 1 January 1992, you can adjust the input value upwards in accordance with certain rules and rates. For 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 1:

A large plot of land of 100,000 m2 was purchased in 1979 for the sum of NOK 400,000. A few years later, a plot of 1,000 m2 was split off and sold for NOK 40,000.

Calculation of the plot's input value:

Input value NOK 400,000 x 1/100	NOK 4,000
+ Upward adjustment (NOK 4000 x 80 percent)	NOK 3,200
= Input value after upward adjustment	NOK 7,200

 Gain/loss:

Sale price	NOK 40,000
– Input value	NOK 7,200
= Gain on the sale	NOK 32,800

 

The gain made on the sale of the plot of NOK 32,800 must be entered in the tax return for the year of sale. The gain 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 7,216.

Example 2:

A plot was purchased in 1990 for the sum of NOK 70,000. Work was immediately begun on the plot involving excavations and the construction of foundations. This cost a total of NOK 100,000. The work stopped at the end of 1990. The plot was still in the same state with the foundations still in place a few years later when it was sold for NOK 150,000.

Calculating the input value

Purchase price	NOK 70,000
+ Improvements	NOK 100,000
= Input value	NOK 170,000

Gain/loss:

Sale price	NOK 150,000
- Input value	NOK 170,000
= Loss on sale	NOK 20,000

 

The plot was sold at a loss. The input value can therefore not be adjusted upwards. The deduction of NOK 20,000 must be entered in the tax return and will reduce the seller's general income. If the plot is sold in 2019, the seller’s ordinary income tax will be reduced by NOK 4,400 (20,000 x 22 percent).