During the 2020 year of assessment, the following transaction relating to an asset, occurred in respect of Earth Alternatives (Pty) Ltd (“Earth Alternatives”), a company (not a small business corporation as defined in the Income Tax Act) manufacturing stainless steel drinking bottles.

On 1 December 2019, Earth Alternatives sold their Pretoria West factory for R2 800 000.

The factory was purchased for R1 020 000 on 1 September 2001. A sworn appraiser determined the market value of the factory to be R1 500 000 as at 1 October 2001.

The appraiser’s fee was R6 500. Assume the time apportionment base cost is R1 370 000.

The tax value of the factory at the date of sale was R51 000. Capital allowances of R969 000 were claimed on the factory up to the date of sale.

Earth Alternatives has an assessed capital loss of R10 200 brought forward from the previous year of assessment and its year of assessment ends on 28/29 February.

1. Calculate the recoupment on the sale of the factory.

2. Calculate the adjusted proceeds on the sale of the factory.

3. Calculate the base cost on the sale of the factory.

4. Calculate the capital gain/loss on the sale of the factory.

5. Calculate the taxable capital gain/loss of Earth Alternatives (Pty) Ltd for the 2020 year of assessment.

Answer rating: 100% (QA)

1 Recoupment Cost can be calculated as Proceeds from sale Tax value of the asset Substituting ... View the full answer