Page 18 - Capital Allowances Recoupments Part 3 (CTA)
P. 18
ADDITIONAL CLASS EXAMPLE
In year 1 B Ltd purchases TS @ R100 000 on credit from a
supplier.At the end of year 1 SARS approves a 10% reduction in in
the market value of TS. In year 2 the supplier cancels the debt
of B Ltd for the full amount of R100 000. No stock were sold during year 1 &
year 2.
REQUIRED:
What is the effect on the taxable income for B Ltd for year 1 & year 2?
Year 1
Purchase TS – s 11(a) (R100 000)
Closing stock – s 22(1)(a) [R100 000 x 90%] + R90 000
Year 2
Opening stock – s 22(2) (R90 000)
Reduction of debt: Debt financed the acquisition of TS,
Not yet sold at the date of debt reduction: s 19(3) + R90 000
Debt reduction (R100 000) exceeds R90 000, and
will be deemed = s 8(4)(a) recoupment: s 19(4) + R10 000
Closing stock – s 22(1) -
