Primary residence was in wife's name. Husband operated business from home and claimed business expenses iro area of home used for business (7%). Primary residence has now been sold. Does CGT only get shown on the wife's side as it is in her name?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
The principle is that the primary residence exclusion (R2 million) does not apply where the individual used that residence (or a part thereof) for the purposes of carrying on a trade – see paragraph 49(b) of the Schedule. The relevant words are “where a natural person … disposes of an interest in a primary residence … then paragraph 45(1)(a) must apply only in respect of the portion of the capital gain … on disposal of the primary residence that is attributable … to the part of that residence used by that person, spouse or beneficiary mainly for purposes other than the carrying on of a trade.”
This means, in the first place, that the part used by the spouse will not qualify for the exclusion.
The next issue to be determined is whether the spouses jointly held an interest in the primary residence “at the same time”. If so, the amount to be disregarded (R2 million) must be apportioned in relation to each interest so held. For instance, if they are married in community of property, the spouse disposing of the property will then be entitled to R1 million only.