Page 117 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes PN 4/1999
Note:
As the debt is written off as irrecoverable it is for practical purposes considered to have been realised and no further exchange differences will thereafter be taken into account for tax purposes, except in respect of that portion of the amount of the exchange item written off which is recouped or recovered at a later stage.
YEAR END 28-02-1999
Bad debts recovered
Portion of the debt recovered [($90 000 x 0.5) x 6,5400]
R294 300 recoupment
The recoupment can be divided into two portions —
(1) Section 8 (4) (a) recoupment
(R580 500 x 0.5)
(2) Exchange difference not calculated
Ruling exchange rates:
Date written off
Date recovered
Exchange difference:
[(6,4500 – 6,5400) x ($90 000 x 0.5)]
6,4500 6,5400
R290 250 R4 050
R294 300
NET TAX RESULT
(+ R10 800 – R580 500 + R294 300)
RECONCILIATION
Selling price of stock on transaction date ($90 000 x 6,3300)
Rands received on 10-05-1998 on the sale of dollars received from the liquidator [($90 000 x 0.5) x 6,5400]
Net loss
EXAMPLE 8
CHANGE IN THE TYPE OF CURRENCY UNIT
On 1 November 1997 a taxpayer borrowed DM500 000 97 from a bank in Germany. The loan was repayable on
31 October 1998. On 1 May 1998 the taxpayer entered into an agreement with the bank that the loan was no longer repayable in German mark, but in US dollars, translated at the DM/$ spot rate on that date, namely DM1,6883/$1. The taxpayer’s nancial year ends on 28 February.
R275 400 loss
(R569 700) R294 300
R275 400
MARKET RATES FOR PURPOSES OF THE EXAMPLE
DATE
SPOT RATE R/DM
SPOT RATE R/$
01-11-1997
3,5400
28-02-1998
3,6300
01-05-1998
3,6900
6,2298
31-10-1998
6,4850
SAIT CompendIum oF TAx LegISLATIon VoLume 2 109