CGT consequences of the sale of a Kruger rand without the base cost available
09 February 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: How will capital gains tax (CGT) be
calculated on the sale of a Kruger rand, where the client does not have any
records of what she paid for it?
A: Paragraph 1 of the
Eighth Schedule (Sch) of the Income Tax Act in its definition of "asset”
includes any coin mainly made of gold or platinum (i.e. Krugerrands).
Paragraph 25 Eighth Sch determines that the base of pre-valuation date
assets must be determined in terms of para 26-29. Paragraph 26(2) provides that
where the pre-valuation date expenditure cannot be determined the taxpayer must
adopt either the market value method (para 29) or the 20% of proceeds method.
To use the market value method SARS will in terms of para 29(4) require
that the asset was valued by the dates prescribed (either Sep 2004 or two years
after 1 Oct 01), though it may be technically argued that this provision only
applies to para 26(1) and not (2).
In our view the taxpayer would most
probably have to adopt the 20% of proceeds method.
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.