Page 105 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes YEAR END 28-02-1998
PN 4/1999
Method 1
Method 2
Ruling exchange rates:
Transaction date
Date of transaction
1. 6,4500 + [(6,5200 + 5,4000)] x 4 + 5]
Exchange difference:
[6,5200 – 6,5400) x $150 000] [6,5200 – 6,5300) x $150 000]
6,5200 6,5400
+ R3 000
6,5200 6,53001
+R1 500
YEAR END 28-02-1999
Method 1
Method 2
Ruling exchange rates:
Previous date of transaction Date of realisation
Exchange difference:
[6,5400 – 6,5400) x $150 000]
[6,5300 – 6,5300) x $150 000] + R3 000
6,5400 6,5800
+ R6 000
6,5300 6,5800
+R7 500
NET TAX RESULT
(+ R3 000 + R6 000) or (+ R1 500 + R7 500)
RECONCILIATION
Rands paid on date of realisation (6,5200 x $150 000)
Rands received on date of realisation (6,5800 x $150 000)
Net gain
EXAMPLE 3
FOREIGN CURRENCY OPTION CONTRACT
On 01-01-1998 the taxpayer concluded a foreign currency option contract in terms of which the right was obtained to purchase $80 000 on 30-06-1998 at a rate (the option strike rate) of 6,4000. The premium on the option contract amounted to R4 000. The taxpayer used a market related valuation method for accounting purposes, to value the option at year end. The option was exercised on 30-06-1998 and the dollars obtained were sold on the same day at the spot rate. The tax year ends on 28 February.
R9 000 gain
R978 000 R987 000
R9 000
MARKET RATES FOR PURPOSES OF THE EXAMPLE
DATE
SPOT RATE R/$
01-01-1998
6,4000
28-02-1998
6,4500
30-06-1998
6,6000
SAIT CompendIum oF TAx LegISLATIon VoLume 2 97