A cap­i­tal loss?

Finweek English Edition - - FEEDBACK - John Nimmo Pravir Jeaven,

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.

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