Page 13 - Chapter 23 - Interest

Example - Incurral Of Interest

Issuer =
pays interest

A taxpayer entered into an agreement on 1 October

2013 whereby he issued a financial instrument with a

face value of R1 000 000 at a discount of 40%. The

financial instrument has a maturity date of 30

September 2016 (when face value will be repaid). The

taxpayer’s financial year ends February.

The yield to maturity rate is 18,56311%

Calculate the effect on the taxpayer's taxable

income for 2014 – 2015 yoa