Page 115 - P6 Slide - Taxation - Lecture Day 1
P. 115
Example
Mr A borrowed R5 million from ABC Bank to acquire two
vacant lots. Vacant Lot 1 was purchased for R3 million
and Vacant Lot 2 was purchased for R2 million. Vacant
Lot 2 was sold for R1,2 million, generating a R800 000
capital loss. Due to circumstance outside Mr A’s control,
Vacant Lot 1 has also significantly declined in value. In
order to alleviate Mr A’s circumstances, ABC Bank
cancels R3 million of the debt. Of this amount, R2 million
of the debt reduction is attributable to formerly held
Vacant Lot 2 and R1 million of the debt reduction is
attributable to Vacant Lot 1.
Explain the CGT consequences of the cancellation of
the debt on Mr A.
