Page 116 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes PN 4/1999 NET TAX RESULT R27 000 gain
(+ R6 000 + R6 000 + R0 + R12 000 + R15 000 – R12 000)
RECONCILIATION
Selling price of machine on transaction date (R1 923 000) ($300 000 x 6,4100)
Rands paid on 01-05-1998 to purchase dollars for delivery in terms of the forward exchange contract
($300 000 x 6,5300)
Rands received on 01-05-1998 on the delivery of dollars in terms of the forward exchange contract
($300 000 x 6,4900)
Rands received on 10-05-1998 on the sale of dollars received from the American business
($300 000 x 6,5400)
Net gain
EXAMPLE 7
DEBT (RECEIVABLE IN DOLLARS) WHICH HAS BECOME IRRECOVERABLE, WAS WRITTEN OFF AND
THEN PARTIALLY RECOVERED
On 1 November 1997 a South African company which manufactures vehicles delivered a consignment of 5 vehicles to
a customer in Botswana. The selling price was $90 000 which was payable within 30 days. The customer was liquidated and on 28 February 1998 (end of the nancial year) the company wrote off the full selling price. The company, however, received a payment of 50 cents in the dollar from the liquidator of the customer on 10 May 1998.
(R1 959 000) R1 947 000 R1 962 000
R27 000
MARKET RATES FOR PURPOSES OF THE EXAMPLE
DATE
SPOT RATE R/$
01-11-1997
6,3300
28-02-1998
6,4500
10-05-1998
6,5400
YEAR END 28-02-1998 Debt
Ruling exchange rates:
Transaction date (01-11-1997) Date of translation (28-02-1998)
Exchange difference:
[(6,3300 – 6,4500) x $90 000]
Bad debts
6,3300 6,4500
The debt would originally have been recorded at R569 700 calculated at the spot rate ($90 000 x 6,3300). The amount which could be written off on 28-02-1998 as recoverable in terms of section 11 (i), is determined by translating the debt at the spot rate on the date of write-off (28-02-1998).
Bad debts on 28-02-1998 R580 500 loss ($90 000 x 6,4500) or (R569 700 + R10 800)
R10 800 gain
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SAIT CompendIum oF TAx LegISLATIon VoLume 2