Page 208 - SAIT Compendium 2016 Volume2

IN 8 (3) Income Tax acT: InTeRPReTaTIon noTes IN 8 (3)
During the period 15 October 2012 to 7 February 2013
• Sports bar income of R100 081 was generated and allowable expenditure (before any allowances have been taken into account) amounted to R98 660.
• Interest income of R1 500 was received.
• The sports bar was sold at an auction on 31 January 2013 for R400 000, of which R300 000 was paid for the business
premises, R80 000 for the furniture and R20 000 for the kitchen equipment. The business premises of the sports bar were bought for R120 000 on 15 November 2011 (no allowances had been claimed for tax purposes). The kitchen equipment was bought on 1 March 2004 for R100 000 and was written off over a period of 6 years.
• X’s primary residence which was bought on 2 November 2011 for R600 000 was also sold at the auction for R1 700 000.
The trustee will elect the section 11(o) allowance wherever applicable Result:
Tax impact of the disposal of furniture
Section 8 (4) (a) recoupment or section 11 (o) allowance
Purchase price of furniture
Less:
Depreciation allowed 2013 – before insolvency
R180 000/6 years × 228/365 days Depreciation allowed – insolvent estate R180 000/6 years × 116/365 days
Tax value on date of sale Less: Proceeds Section 11 (o) allowance Capital gain or (loss) Proceeds
Less: Base cost (R180 000 – R28 274 – R71 726) Capital gain or (loss)
Tax impact of the disposal of kitchen equipment
Proceeds
Tax value of kitchen equipment on 31/01/2013
(purchased in 2004 and written off over 6 years)
Section 8 (4) (a) recoupment
Capital gain or (loss)
Proceeds (sales price – recoupment)
Less: Base cost [purchase price – amounts claimed under
Section 11 (e)] Capital gain or (loss)
Tax impact of the disposal of business premises
Capital gain or (loss)
Proceeds
Less: Base cost Capital gain or (loss)
Tax impact of the disposal of residence
Capital gain or (loss)
Proceeds
Less: Base cost
Capital gain or (loss)
Less: Primary residence exclusion Capital gain or (loss)
R
(18 740) (9 534)
R 180 000
(28 274) 151 726 (80 000) 71 726
80 000 (80 000) NIL
20 000
NIL 20 000
NIL
NIL NIL
300 000 (120 000) 180 000
1 700 000 (600 000) 1 100 000
(2 000 000) NIL
200 saIT comPendIum oF Tax LegIsLaTIon VoLume 2