A taxpayer sells shares in a company. The sale agreement provides for immediate transfer of the shares although the payment terms are an initial amount and then 4 years of "buy out" payments determined on profits. 24M deems the buyout payments to be earne
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We are not sure why you consider that section 24M will apply here – where is the unquantified amount? We agree that it would NOT be relevant if the person ceases to be a resident of the RSA before the actual time of disposal (see paragraph 13 of the Eighth Schedule).
You mention that the person emigrated between the “date of sale and before the first buyout payment”.
The law relevant to the time of disposal, of an asset not held as trading stock, 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—
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a change of ownership affected or to be affected from one person to another because of an event, act, forbearance or by the operation of law is, in the case of—
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an agreement subject to a suspensive condition, the date on which the condition is satisfied;
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any agreement which is not subject to a suspensive condition, the date on which the agreement is concluded;”
It is unlikely that payment terms relating to the transfer of the disposal of the property will constitute a suspensive condition. 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 section 24M doesn’t apply, the time of disposal may well be the date of sale that you referred to.