How often Capital gains tax is asked

Where it was asked

• May/Jun 201425 marks
• Oct/Nov 201325 marks
• May/Jun 201315 marks

The questions

1. May/Jun 2014, Q3.117 marks

   Aerostar (Pty) Ltd is a South African company that manufactures and sells sports cars. The company has a February year-end. Aerostar (Pty) Ltd brought forward an assessed capital loss of R64 500 from the previous year of assessment. During the 2014 year of assessment two capital transactions occurred. Firstly, Factory A, which had been purchased on 15 July 1998 for R250 000 and brought into use on the same date directly in the process of manufacturing the sports cars, was sold on 12 January 2014 to an unconnected person for R780 000. Transfer costs of R25 000 were incurred on the original purchase price of Factory A, and total capital allowances of R220 000 had been claimed on the factory up to the date of disposal. Additional information relevant to Factory A is that its market value on 1 October 2001 was R350 000 and its time-apportionment base cost (TAB) is R98 125. Secondly, Aerostar (Pty) Ltd sold manufacturing machine C on 18 May 2013, realising a capital gain of R50 000 on this machine. You are required to calculate the taxable capital gain or taxable capital loss of Aerostar (Pty) Ltd for the year of assessment ended 28 February 2014.

2. May/Jun 2014, Q3.28 marks

   Aerostar (Pty) Ltd is a South African company that manufactures and sells sports cars. The company has a February year-end. Aerostar (Pty) Ltd had a taxable income of R1 150 622 for the 2012 year of assessment, with the date of that assessment being 30 July 2012. The company's 2013 tax assessment was issued on 15 June 2013 and reflected a taxable income of R1 320 564. The actual taxable income calculated for the 2014 year of assessment was R1 055 877. For this part, Aerostar (Pty) Ltd is a small business corporation as defined in the Income Tax Act, and the company has a February year-end. You are required to (a) calculate the first provisional tax payment for the 2014 year of assessment and state clearly the date by which this payment must be made to SARS, and (b) calculate the second provisional tax payment for the 2014 year of assessment and state clearly the date by which this payment must be made to SARS. All amounts must be rounded to the nearest Rand.

3. Oct/Nov 2013, Q4.117 marks

   Question 4 concerns capital gains tax (CGT) matters for two separate companies. Tambotie Ltd, a furniture manufacturer whose year of assessment ends on 31 March, is not classified as a small business corporation or a micro business under the Income Tax Act. On 1 January 2013 Tambotie Ltd sold an office building that was no longer in use for R3 500 000. The building had been acquired for R3 250 000 on 1 March 2005, and Tambotie Ltd incurred transfer costs of R90 000 in acquiring it; no capital allowances were ever claimed on this office building. Separately, on 1 February 2013 a manufacturing machine was stolen from the company's factory. This machine had been purchased new on 20 November 2011 for R620 000, and by 1 February 2013 total capital allowances of R372 000 had been claimed on it. The company was fully insured for the machine's replacement cost, and the insurers paid out R680 000 on 25 February 2013. Tambotie Ltd also has an assessed capital loss of R12 000 brought forward from the previous year of assessment. You are required to calculate the taxable capital gain or loss of Tambotie Ltd for the 2013 year of assessment.

4. Oct/Nov 2013, Q4.28 marks

   Question 4 concerns capital gains tax (CGT) matters for two separate companies. Grey (Pty) Ltd sold a factory building on 1 February 2012 for R8 250 000, at which date its tax value was R1 470 000. The company had acquired the factory building for R4 200 000 on 1 December 2000 and brought it into use directly in a process of manufacture on that same date. You must assume that the adjusted proceeds for capital gains tax purposes amount to R5 520 000. Valuation costs of R7 000 were paid to a sworn appraiser who assessed the market value of the building at R900 000 as at 1 October 2001, and the time-apportionment base cost of this asset is R856 500. Grey (Pty) Ltd's year of assessment ends on 31 December 2012. You are required to calculate only the amount of the base cost of the building, which will form part of the capital gains tax calculation for Grey (Pty) Ltd's 2012 year of assessment.

5. May/Jun 2013, Q515 marks

   Frozen Lemons CC, which has a year-end of 31 March, provides the following details concerning a manufacturing building it owned: the building was purchased on 1 July 2000 for R80 000, and it was sold on 1 April 2012 to an unconnected party at market value for R890 000. Other relevant information includes a valuation of the building performed on 1 October 2001 amounting to R88 000, a time-apportioned base cost of R90 000, the cost of obtaining that valuation (carried out on 1 July 2002) of R4 500, capital allowances claimed up to the date of sale totalling R48 000, and an assessed capital loss of R30 000 brought forward from the 2012 year of assessment. You are required to calculate the taxable capital gain arising for the 2013 year of assessment in respect of the disposal of this manufacturing building.