My client sold a portion of a farm (no a primary residence) in return for (1) R1 million to be paid out to other shareholders loan account, (2) 4 properties to the value of R4 million & (3) R150k in cash (Numbers rounded for ease of calculation). Base cos
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We agree that the roll-overs, provided for in paragraph 65 or 66 of the Eighth Schedule to the Income Tax Act, will not apply in this instance – not an involuntary disposal or acquisition of qualifying replacement assets.
It also doesn’t appear that the consideration is not quantified and section 24M is then not applicable.
Your request may well relate to the time of disposal. We don’t have enough information to provide the guidance here. The law relevant to the time of disposal is found in paragraph 13(1) of the Eighth Schedule to the Income Tax Act. It reads as follows:
The time of disposal of an asset by means of—
(a) a change of ownership effected or to be effected from one person to another because of an event, act, forbearance or by the operation of law is, in the case of—
(i) an agreement subject to a suspensive condition, the date on which the condition is satisfied;
(ii) any agreement which is not subject to a suspensive condition, the date on which the agreement is concluded;
We don’t know if the terms relating to the transfer of the properties or disposal thereof constitute a suspensive condition. It may well not. Judge Wallis, in the recent CSARS v Bosch, said:
“A suspensive condition is one that suspends the exigible content of a contract, either in whole or in part, pending the occurrence of an uncertain future event.”
If they are not suspensive conditions, we don’t agree with your view – there then was an accrual and consequently proceeds.