Siblings, Aishwarya, Dhanya and Ganesh own properties around Malaysia and derive rental income from these properties. Listed below are the properties owned by them with the market value as at 31December 2019:

Market value

RM

Condominium in Penang - owned by Aishwarya1,200,000

Terrace house in Seremban - owned by Dhanya450,000

Bungalow in Kuala Lumpur - owned by Ganesh1,900,000

Shophouse in Ipoh- owned by Aishwarya1,000,000

4,550,000

All the properties were purchased without any external borrowings. The siblings decided to set up a company, ADG Properties Sdn. Bhd. (ADG), transferred all the properties owned by them to that company. Their intention is for the company to manage the rental collection and to acquire further properties for rental purpose. They do not intend to provide any ancillary services for any of the rental properties.

ADG will acquire the properties by issuing ordinary shares equal to the value of the properties to the siblings. They will transfer the properties to ADG on 31 December 2019 and ADG will start to collect all rentals from January 2020.

On 31^st August 2021, ADG disposed off the condominium in Penang for a sum of RM 2,000,000 and incurred agent fees of RM25,000 for the disposal.

Required

The siblings have approached you as a tax consultant for advice on the tax impact on the forming of ADG Properties Sdn. Bhd. and the transfer of the properties to ADG. Your advice should consider the following aspects:

(a)Discuss the RPGT exposure for the disposal of the properties by the siblings to ADG Properties Sdn. Bhd.

(b)Calculate the RPGT exposure on the disposal of the condominium by ADG Properties Sdn. Bhd.