A capital loss?
writes via email: Considering that some money-market investments are held within the universe of the unit trust industry (as offered by the likes of Stanlib), would it not be correct to report the write-off suffered by investors as a result of the African Bank Investments Limited (Abil) misfortune as a capital loss for capital gains/loss purposes? Had you sold any unit trust, you would expect to receive appropriate reporting (be it loss or profit) from the invest broker/institution.
Tax Manager Corporate Tax at KPMG , responds: Although it may appear that investors do not receive the “capital loss” for an event such as the Abil misfortune, this is generally compensated by the financial market itself. For example, let’s say that an investor invested in a unit in a money-market investment prior to the Abil misfortune for a R1 000 per unit (being the market value of such investment). Thereafter, as a result of the Abil misfortune, the market value of the unit in the money-market account drops to R900, resulting in an unrealised loss for the investor. Although the investor has not disposed of the unit at this stage, the Abil misfortune would be an inherent cost in the value of the unit and the “capital loss” would be realised at the stage of disposal of the unit.