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Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW -

the base cost of the as­set.

The pro­ceeds from the dis­posal of an as­set are equal to the amount re­ceived by or ac­crued to the tax­payer.

Where dur­ing the cur­rent tax year the tax­payer be­comes en­ti­tled to any amount which is payable in a sub­se­quent tax year, the full amount must be treated as hav­ing ac­crued to the tax­payer in the cur­rent tax year. A tax­payer is con­sid­ered to be en­ti­tled to an amount if the en­ti­tle­ment is un­con­di­tional. For in­stance, in the New Ad­ven­ture case, while the sec­ond in­stal­ment of the price was only due in a tax year af­ter the sale and trans­fer of the prop­erty, the full price had ac­crued to the tax­payer in the 2007 tax year as the tax­payer had be­come un­con­di­tion­ally en­ti­tled to the amount.

To the ex­tent that the tax­payer does not have an un­con­di­tional en­ti­tle­ment to the pro­ceeds in the cur­rent tax year, the tax­payer must ac­count for CGT in the tax year dur- ing which the pro­ceeds ac­tu­ally ac­crue. How­ever, a cap­i­tal loss re­alised by a tax­payer in the year of dis­posal must be car­ried for­ward and de­ducted in the year that the pro­ceeds do ac­crue, sub­ject to cer­tain rules re­lat­ing to the de­ter­mi­na­tion of cap­i­tal losses. For in­stance a tax­payer sells im­mov­able prop­erty to a pur­chaser for R2m in tax year one. Of the price R500,000 is only payable in tax year two if the pur­chaser is suc­cess­ful in re­zon­ing the prop­erty.

The tax­payer will ac­count for CGT on R1,5m in tax year one only and will ac­count for CGT on R500,000 in tax year two if the con­di­tion of re­zon­ing is ful­filled. Con­ceiv­ably, the par­ties in the New Ad­ven­ture case could have made the pay­ment of the sec­ond in­stal­ment con­tin­gent on the pur­chaser be­ing suc­cess­ful with the devel­op­ment, in which case the tax­payer would only have had to ac­count for the part of the price ac­tu­ally re­ceived dur­ing the 2007 tax year.

If a per­son dur­ing a tax year dis-

Pic­ture: iS­TOCK

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