IT ALL ADDS UP
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-