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CGT consequences of the sale of a Kruger rand without the base cost available

09 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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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.


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