Page 22 - PowerPoint Presentation
P. 22
Solution – Roll-overs (cont.)
New machine:
Original cost R450 000
Less: Section 12C allowance (2015 tax year) (40% of R450 000) 180 000
Income tax value at end of year R270 000
Capital gain on disposal of old machine:
Proceeds on disposal R150 000
Less: Section 8(4)(a) recoupment 60 000
R90 000
Less: Base cost (income tax value calculated above) 40 000
Capital gain R50 000
The capital gain of R50 000 on the old machine must be disregarded. In its
place, the company must account for 40% of the capital gain in the 2015 year of
assessment and 20% of the capital gain in each of the following three years of
assessment. If the company disposes of the new machine or ceases to use it for
the purposes of its trade in a year of assessment before the full capital gain has
been brought into account, it must treat the balance of the capital gain that has
not yet been brought into account as a capital gain in that year.
