Page 501 - SAIT Compendium 2016 Volume2

IN 53 (2) Income Tax acT: InTeRPReTaTIon noTes IN 53 (2)
Example 4 – Recoupment and taxable capital gain
Facts:
Company Y’s only asset is an aircraft which it acquired at a cost of R100 million in year 1. The company let the aircraft to a single lessee during years 1 to 5 before selling it for R110 million at the end of year 5.
The aircraft quali ed for capital allowances of R20 million a year under section 12C. During years 1 to 4 the company was able to claim capital allowances of only R52 million because it had insuf cient net rental income during those years. The balance of unclaimed capital allowances carried forward to year 5 under section 23A(4) amounted to R28 million [(R20 million × 4) – R52 million]. In year 5 the company derived taxable income of R18 million from letting before capital allowances, recoupments and capital gains. Determine Company Y’s taxable income for year 5.
Result:
Cost of aircraft
Less: Capital allowances – claimed years 1 to 4
Capital allowances – brought forward and claimed in year 5
Capital allowances – current year
Tax value
Amount received or accrued on sale [paragraph 35(1)]
Less: Section 8(4)(a) recoupment [paragraph 35(3)(a)]
Proceeds Base cost:
Cost [paragraph 20(1)(a)]
Less:Capital allowances [paragraph 20(3)(a)(i)] Base cost
Capital gain
Taxable capital gain (66,6% × R10 million) Tax computation – year 5
Rental income Recoupment Taxable capital gain Subtotal
Less: Unclaimed capital allowances brought forward Capital allowances – current year
Taxable income
R
100 000 000
(52 000 000)
(28 000 000)
(20 000 000)
Nil
110 000 000
(100 000 000)
10 000 000 100 000 000
(100 000 000) Nil
10 000 000 6 660 000
18 000 000 100 000 000 6 660 000 124 660 000 (28 000 000) (20 000 000) 76 660 000
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