CGT implications of a Deferred delivery sale
Capital Gains Tax consequences of a Deferred Delivery Sale
I refer to the client request for an opinion regarding the Capital Gains Tax (“CGT”) implications of a deferred delivery sale. There are two specific questions on hand; whether the deferred delivery sale results in two disposals for CGT purposes as well as whether the growth in the value of the asset from the date of concluding the sale of the asset until the date of delivery is subject to CGT.
Set out below is an analysis and interpretation of the Eighth Schedule of the Income Tax Act 58 of 1962 (“The Act”) in respect of the CGT implications for a so-called deferred delivery sale.
Facts
1.1 An agreement has been concluded unconditionally
1.2 This agreement provides for the delayed delivery of the subject matter (a so-called deferred delivery sale)
1.3 The immediate result is the creation of two rights, namely, the seller’s right to payment of the purchase consideration and the purchasers right to the delivery of the subject-matter.
Questions
2.1 Whether a deferred delivery sale result in two disposals for CGT purposes, namely, one when the parties enter into the agreement and the other when delivery of the asset takes place; and
2.2 Whether the growth in the value of the asset from the date of concluding of the sale of the asset until the date of delivery subject to CGT.
The Law
3.1 Definitions paragraph 1 of the Eighth Schedule
An “asset” includes—
(a) Property of whatever nature, whether movable or immovable, corporeal or incorporeal, excluding any currency, but including any coin made mainly from gold or platinum; and
(b) A right or interest of whatever nature to or in such property;
A “disposal”, means an event, act, forbearance or operation of law envisaged in paragraph 11 or an event, act, forbearance or operation of law which is in terms of this Schedule treated as the disposal of an asset, and ‘dispose’ must be construed accordingly;
A disposal in
I refer to the client request for an opinion regarding the Capital Gains Tax (“CGT”) implications of a deferred delivery sale. There are two specific questions on hand; whether the deferred delivery sale results in two disposals for CGT purposes as well as whether the growth in the value of the asset from the date of concluding the sale of the asset until the date of delivery is subject to CGT.
Set out below is an analysis and interpretation of the Eighth Schedule of the Income Tax Act 58 of 1962 (“The Act”) in respect of the CGT implications for a so-called deferred delivery sale.
Facts
1.1 An agreement has been concluded unconditionally
1.2 This agreement provides for the delayed delivery of the subject matter (a so-called deferred delivery sale)
1.3 The immediate result is the creation of two rights, namely, the seller’s right to payment of the purchase consideration and the purchasers right to the delivery of the subject-matter.
Questions
2.1 Whether a deferred delivery sale result in two disposals for CGT purposes, namely, one when the parties enter into the agreement and the other when delivery of the asset takes place; and
2.2 Whether the growth in the value of the asset from the date of concluding of the sale of the asset until the date of delivery subject to CGT.
The Law
3.1 Definitions paragraph 1 of the Eighth Schedule
An “asset” includes—
(a) Property of whatever nature, whether movable or immovable, corporeal or incorporeal, excluding any currency, but including any coin made mainly from gold or platinum; and
(b) A right or interest of whatever nature to or in such property;
A “disposal”, means an event, act, forbearance or operation of law envisaged in paragraph 11 or an event, act, forbearance or operation of law which is in terms of this Schedule treated as the disposal of an asset, and ‘dispose’ must be construed accordingly;
A disposal in