Limitation of allowances claimable by lessors
| OUTCOMES OF TOPIC After studying this topic related to disposals, recoupments and scrapping allowance you should be able to: ✓ Understand what is meant by “disposal of an asset”; ✓ Understand what is meant by “recoupment”; ✓ Understand when the general recoupment provision is applicable; ✓ Calculate a recoupment using the basic recoupment formula; ✓ Calculate the tax value of an asset; ✓ Understand what is specifically excluded from the general recoupment provision; ✓ Identify the specific provisions in the Income Tax Act that specifically prohibit the application of section 8(4)(a); ✓ Understand when section 8(4)(k) will be applicable; ✓ Understand what the implications will be if section 8(4)(k) is applicable; ✓ Identify the nature of a disposal (voluntary vs involuntary); ✓ Understand how a deferral works; ✓ Understand what is meant by “scrapping allowance”; ✓ Understand the difference between a section 11(o) allowance and a recoupment; ✓ Identify under which circumstances a scrapping loss will arise; ✓ Identify under which circumstances a scrapping loss will not be deductible. ✓ Be able to properly disclose adjustments related to the disposal of and asset and the resulting recoupments and or scrapping allowance and complete the relevant sections on the ITR14. |