Q: I have a taxpayer who is currently being audited by SARS. He previously
resided in Johannesburg and sold his primary residence to move to Cape Town.
Whilst his new house in Cape Town was being constructed, he rented out the
primary residence in Johannesburg for R 36 000 per month prior to the sale of
the property being finalised. He also paid rent on a property he temporarily
lived in while in Cape Town during the period that his primary residence in
Johannesburg was being sold.
Can the rent paid be claimed as a deduction against the rental income
received? SARS is taxing him on the rental income received but is unaware that
he also had rental expense during this period.
A: In our view the CPT rental expense is not causally linked to the JHB
rental income in that it was not incurred for the proposes of producing rental
income, but the income was rather a passive result of the decision to move to
CPT. The CPT property was merely leased to provide accommodation while the
house was being built.
are therefore of the view that section 11(a) of the Income Tax Act would not
apply to the lease expense of the CPT property.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
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