Page 129 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes
PN 4/1999
Loan (£133 333)
Ruling exchange rates:
Transaction date (30-06-1996) (See calculation 2)
Date of translation (31-12-1996)
Exchange difference:
[(5,6250 – 5,6600) x $133 333]
Portion of exchange difference deductible from income in the 1996 year of
assessment
[(- R9 000 – R30 000 – R4 666) x 10%]
Deferred amount of exchange differences to be deducted in following years [R43 666 – R4 367]
Calculations :
(1) Amount received on disposal of dollar loan Foreign currency amount of loan
Disposal rate (R749 333 ÷ $200 000)
(2) Costs incurred to acquire pound sterling loan Foreign currency amount of loan Acquisition rate (R750 000 ÷ £133 333)
5,6250 5,6600
YEAR END 31-12-1997 Loan (£100 000)
Ruling exchange rates:
Date of previous translation (31-12-1996) Date of realisation (9-11-1997)
Exchange difference:
[(5,6600 – 5,7200) x $100 000]
Note:
5,6600 5,7200
As the portion of the loan which is repaid is not a qualifying exchange item, the provisions of section 24I(7A) do not apply and the full exchange difference calculated must be brought into account as taxable income
Unclaimed exchange differences brought forward from previous year
Reduction in terms of s 24I(7A)(d)(i) deductible in current year [(100 000 ÷ 133 333) x 39 299]
R39 299 loss R29 474 loss
R4 666 loss R4 367 loss
R39 299 loss
R749 333 $200 000 3,7467
R750 000 £133 333 5,6250
COMPARISON OF GAIN AND LOSSES FOR THE YEAR IN RESPECT OF THE ALTERNATIVE TREATMENT OF THE CONVERSION
ITEM
ALTERNATIVE 1
ALTERNATIVE 2
ALTERNATIVE 3
Realised dollar loan
(30 000)
(29 333)
(30 000)
Pro t on conversion
667
-
-
Translation of £ – loan
(5 333)
(5 333)
(4 666)
Total
(34 666)
(34 666)
(34 666)
R6 000 loss
SAIT CompendIum oF TAx LegISLATIon VoLume 2
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