QUESTION (25 marks)

Liam Harrington, a 62-year-old South African resident, plans to emigrate to New Zealand on 15 December 2023 after he and his family went through a traumatic experience when they were hijacked and brutally injured.

Below is a list of Liam’s assets and the market value of these assets on the date of emigration. Liam will sell the rest of his assets at a later stage once they have settled into their new residence in New Zealand.

1. Liam’s primary residence was initially acquired for R2 300 000 in 2010. Liam also paid transfer duties of R150 000. Liam indicated that he put in a swimming pool at a cost of R120 000 in 2019. Liam also made repairs to the house over the years amounting to R200 000. Liam sold the house on 31 December 2023 for R3 100 000.

2. Liam owned a flat that he purchased in 2015 for R1 500 000. He decided to sell the flat to his mother on 14 December 2023 for R1 600 000.

3. Liam purchased a Ford Ranger bakkie in 2015 for R800 000.

4. Liam bought a 9-metre speedboat for R400 000 for recreational purposes in 2018.

5. Liam bought Krugerrands in 2012 for R250 000.

6. In 2014 Liam bought 20 000 listed shares in Absolute Adventures Limited for R300000. Liam held these shares as a long-term investment.

Liam had an assessed capital loss of R80 000 to bring forward from the 2023 year of assessment.

REQUIRED:

Prepare a spreadsheet that can be used to calculate the taxable capital profit or loss to be included in Liam Harrington’s taxable income for the 2024 year of assessment.

The spreadsheet should be as simple and easy as possible to use.

You, therefore, need to use formulas, as far as possible, to automate the process.

Instructions:

1. Refer to the ‘Input’ sheet.

2. You have to follow the instructions below in order to populate the yellow cells.

3. Refer to the following section of the sheet:

• In cells C2 to C7, type “YES” or “NO” based on whether the transactions (1 – 6)

will have capital gains tax consequences.

• In cells D2 to D7, type the amount of Proceeds for each transaction (1 – 6) based on the information provided in the scenario. If no deemed disposal is applicable, type “0” as the amount of Proceeds.
• In cells E2 to E7, type the amount of Base cost for each transaction (1 – 6) based on the information provided in the scenario.
• In cells F2 to F7, use an if-formula based on your answer in cells C2 to C7. If your answer in a column C cell states “YES”, then the sum of column D & E (Proceeds less base cost) should pull through, otherwise, zero must be shown.

4. Refer to the following section of the sheet:

• In cell D9, type “YES” or “NO” depending on the information provided in the scenario. If the person is a ‘natural person’ type “YES”, otherwise type “NO”.
• In cell F11, use a sum formula to calculate the total capital gains and losses in column F.
• In cell F12, use an if-formula based on your answer in cell F2 to be applied for the primary residence exclusion. The primary residence exclusion should show as a negative value.

• In cell F13, use an if-formula based on your answer in cell D9. If it is a natural person, cell F13 must show the annual exclusion, otherwise zero. The annual exclusion should show as a negative value.
• In cell F14, use a sum formula to calculate the aggregate capital gain or loss.
• In cell F15, type in the value of the assessed loss brought forward from the previous year of assessment if applicable.
• In cell F16, use a sum formula to calculate the net capital gain or loss.

• In cell F17, use an if-formula based on your answer in cell D9. The if- formula should show the applicable % inclusion rate depending on whether the person is a natural person or not.
• In cell F18, use a multiplication value to calculate the taxable gain or loss.

Answers to Above Questions on Financial Management

Answer 1: A spreadsheet that can be used to calculate the taxable capital profit or loss to be included in Liam Harrington’s taxable income for the 2024 year of assessment is prepared as follows:

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