Page 209 - SAIT Compendium 2016 Volume2

IN 8 (3) Income Tax acT: InTeRPReTaTIon noTes IN 8 (3)
Taxable income: insolvent person for the period before insolvency (1 March 2012 – 14 October 2012)
Income from sports bar
301 998 (310 776) (8 778) (18 740) (27 518) (50 000)
6 600 (70 918)
Allowable expenditure
Depreciation – furniture
Assessed loss brought forward on 01/03/2012
Captal gain on sale of listed shares (R50 000 – R30 000 annual
exclusion) × 33.3%
Assessed loss (to be carried forward to insolvent estate)
Note:
Less:
Less:
Less:
(1) The R12 000 interest received by the insolvent person (a natural person) before insolvency quali es for the interest exemption under section 10 (1) (i).
Taxable income: insolvent estate (15 October 2012 to 7 February 2013)
Income from sports bar
Less: Allowable expenditure
Less: Depreciation: furniture
Section 8 (4) (a) recoupment: kitchen equipment
Section 11 (o) allowance: furniture Investment income
Net capital gain = furniture + kitchen equipment + business premises + residence = (Nil + Nil + R180 000 + Nil) × 33.3%
Less:
Assessed loss
Note:
100 081 (98 660) 1 421 (9 534) (8 113) 20 000 (71 726) (59 839) 1 500 (58 339)
59 940 1 601 (70 918) (69 317)
(1) The insolvent person before sequestration and the person’s insolvent estate are regarded to be one and the same person for purposes of the determination of deductions or allowances. The deduction for the depreciation of assets, therefore, continues in the insolvent estate.
(2) The insolvent person before sequestration and the person’s insolvent estate are not regarded to be one and the same person for purposes of determining any exemption. The insolvent estate is not a natural person and does not qualify for the interest exemption in section 10 (1) (i). Accordingly, the interest of R1 500 received by the insolvent estate is fully taxable in the insolvent estate’s hands.
(3) The estate of the person before sequestration and the person’s insolvent estate are regarded to be one and the same person for purposes of the determination of a capital gain or loss. Paragraph 83 (1) provides that the disposal of an asset by an insolvent estate shall be treated in the same manner as if disposed of by the insolvent person. The insolvent estate, therefore, enjoys the same exemptions and exclusions applicable to natural persons. Thus the insolvent estate quali es for the primary residence exclusion of R2 million and an inclusion rate of 33,3%. The insolvent estate does not qualify for an annual exclusion in 2013 because the annual exclusion was fully used by the insolvent person.
(4) The balance of the assessed loss of R70 918 is forfeited and may not be used by the insolvent person for purposes of determining the person’s tax liability for the period after sequestration. The balance of the assessed loss is, therefore, forfeited.
saIT comPendIum oF Tax LegIsLaTIon VoLume 2 201