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Cape income tax special court: Case No 11515

Monday, 05 September 2005   (0 Comments)
Posted by: TaxFind™
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Before the Honourable Justice JHM Traverso : President
Mr. R. de Beer : Accountant Member
Mr. E.E. Grubb : Commercial Member
(Heard in Cape Town on 19 August 2005)

Mini Summary

The appellant was a pensioner of a fund administered by Old Mutual.Upon the demutualisation of Old Mutual in 1999, allocated 3826900 shares to the fund.The shares were converted to cash by the fund and added as a windfall profit to the general reserve account.The trustees then decided to offer the value of the share allocations to pensioners through two options.The appellant chose the option in terms of which his pension would be transferred to an individual contract whereby his membership of the fund would cease and he would become eligible to receive 100% of the value of the demutualisation shares made available to him in a lump sum.

In his relevant tax return the appellant included the receipt of the amount of R155 302, which he indicated as a receipt of a capital nature.The respondent however assessed the appellant on the basis that the amount received was income.

Held that the only question to be determined is whether the amount received by the appellant was received "from or in consequence of" his membership of the fund.The court found that the appellant received the amount in consequence of his membership with the fund.The amount was therefore a lump sum as contemplated in paragraph (e) of the definition of "gross income".

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