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Rollover relief on CGT where immovable property is transferred between spouses

Thursday, 06 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: The client transferred an immovable property in his name into the name of his spouse (married ANC without accrual). Should he pay CGT in the year of transfer? The spouse sold the flat in the following tax year. She will have to pay the CGT since date of initial accrual by her husband (the initial owner)?

A: Our guidance assumes that paragraph 68 of the Eighth Schedule does not apply in this instance.  

On that basis the capital gain or loss (if any) at the time of the initial transfer (from the transferor to the transferee) was disregarded – refer to paragraph 67(1)(a) of the Eighth Schedule to the Income Tax Act.  No taxable capital gain would then have arisen for the transferor.  

The transferee is then treated as having—

(i) acquired the asset on the same date that such asset was acquired by the transferor;

(ii) incurred an amount of expenditure equal to the expenditure contemplated in paragraph 20 that was incurred by that transferor and the executor of the deceased estate of the transferor in respect of that asset;

(iii) incurred that expenditure on the same date and in the same currency that it was incurred by the transferor or the executor of the deceased estate of the transferor;

(iv) used that asset in the same manner that it was used by the transferor and the executor of the deceased estate of the transferor…

The capital gain of the transferee is then basically the proceeds on disposal less the base cost of the transferor, unless the transferee incurred paragraph 20 expenses since the transfer.  

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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