Page 380 - SAIT Compendium 2016 Volume1

Eighth Schedule INCOME TAX ACT 58 OF 1962 Eighth Schedule
(b) the amount of that debt was used as contemplated in item (a) of that subparagraph to fund expenditure incurred in respect of an asset (other than an allowance asset) that is—
(i) held by that person at the time of the reduction of the debt, and subparagraph (3) has been applied to reduce any expenditure in respect of that asset to the full extent of that expenditure; or
(ii) no longer held by that person at the time of the reduction of that debt,
the reduction amount in respect of that debt, less any amount that has been applied to reduce any amount of expenditure as contemplated in subparagraph (3), must be applied to reduce any assessed capital loss of that person for the year of assessment in which the reduction takes place.
[Sub-para. (4) amended by s. 127 (1) (d) of Act 31 of 2013 (date of commencement deemed to have been 1 January 2013) and substituted by s. 82 (1) (b) of Act 43 of 2014 (date of commencement deemed to have been 1 January 2013 as well; the substitution applies iro years of assessment commencing on or after that date) and by s. 106 (a) of Taxation Laws Amendment Act, 2015 – date of commencement: date of promulgation of Taxation Laws Amendment Act, 2015.]
Prelex
Wording of sub-para. (4) in force until the substitution thereof wef the date of promulgation of Taxation Laws Amendment Act, 2015
(4) Where—
(a) a debt owed by a person is reduced as contemplated in subparagraph (2); and
(b) the amount of that debt was used as contemplated in item (a) of that subparagraph to fund expenditure incurred
in the acquisition, creation or improvement of an asset (other than an allowance asset) that is—
(i) held by that person at the time of the reduction of the debt, and subparagraph (3) has been applied to reduce
any expenditure in respect of that asset to the full extent of that expenditure; or (ii) no longer held by that person at the time of the reduction of that debt,
the reduction amount in respect of that debt, less any amount that has been applied to reduce any amount of expenditure as contemplated in subparagraph (3), must be applied to reduce any assessed capital loss of that person for the year of assessment in which the reduction takes place.
(5) Where subparagraph (3) or (4) applies in respect of a debt that was used to fund expenditure in respect of a pre- valuation date asset of a person, for the purposes of determining the date of acquisition of that asset and the expenditure incurred in respect of that asset, that person must be treated as having—
[Words preceding item (a) substituted by s. 127 (1) (e) of Act 31 of 2013 – substitution deemed to have come into operation on 1 January 2013 and applies iro years of assessment commencing on or after that date.]
(a) disposed of that asset at a time immediately before that debt is reduced as contemplated in subparagraph (3) (a) or (4) (a), as the case may be, for an amount equal to the market value of that asset at that time; and
(b) immediately reacquired that asset at that time at an expenditure equal to that market value— (i) less any capital gain, and
(ii) increased by any capital loss,
that would have been determined had the asset been disposed of at market value at that time,
which expenditure must be treated as an amount of expenditure actually incurred at that time for the purposes of paragraph 20 (1) (a).
(6) This paragraph must not apply to any debt owed by a person— (a) that is an heir or legatee of a deceased estate, to the extent that—
(i) the debt is owed to that deceased estate;
(ii) the debt is reduced by the deceased estate; and
(iii) the amount by which the debt is reduced by the deceased estate forms part of the property of the deceased estate for the purposes of the Estate Duty Act;
[Subitem (iii) substituted by s. 106 (b) of Taxation Laws Amendment Act, 2015 (‘, 1955 (Act 45 of 1955)’ deleted) – date of commencement: date of promulgation of Taxation Laws Amendment Act, 2015.]
(b) to the extent that the debt is reduced by way of— (i) donation as de ned in section 55 (1); or
(ii) any transaction to which section 58 applies;
(c) to an employer of that person, to the extent that the debt is reduced in the circumstances contemplated in paragraph
2 (h) of the Seventh Schedule;
(d) to another person where that person and that other person are companies that form part of the same group of
companies as de ned in section 41, unless, as part of any transaction, operation or scheme entered into to avoid any tax imposed by this Act—
(i) that debt (or any debt issued in substitution for that debt) was acquired directly or indirectly from a person who does not form part of that group of companies; or
(ii) that company or that other company became part of that group of companies after that debt (or any debt issued in substitution for that debt) arose; or
(e) that is a company, where—
(i) that debt is reduced in the course, or in anticipation, of the liquidation, winding up, deregistration or nal
termination of the existence of that company; and
(ii) the person to whom the debt is owed is a connected person in relation to that company,
to the extent that reduction amount in respect of that debt does not, at the time that the debt is reduced, exceed the amount of expenditure contemplated in paragraph 20 incurred in respect of that debt by the connected person: Provided that this subitem must not apply—
(aa) if—
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SAIT CompendIum oF TAx LegISLATIon VoLume 1