Page 5 - F6 - Capital Gains Tax - Debt Reduction
P. 5
Solution (inventory)
Amount of the reduction in the debt - R500 000 - applied to
reduce the cost price of the trading stock still held at the time of
the reduction of the debt.
The deduction for the trading stock purchased under s 11(a)
will be reduced to Rnil. Therefore R430 000 of the debt
reduction is applied against the purchase price of the stock still
on hand at date of the debt reduction.
Note that no reduction is made against the R70 000 of trading
stock already sold, since it is no longer part of trading stock at
the time of the debt reduction, as required under s 19(3).
Purchase of trading stock (s 11(a)) (430 000)
Debt reduction under s 19(3) 430 000
Recoupment (s 8(4)(a)) R70 000
The remaining R70 000 of the debt reduction will be a
deemed recoupment in income under s 8(4)(a) (s 19(4)).
