Revenue or Capital?

Question 1

General

Answer 1

• onus on SARS to determine amount
• onus on SARS to prove capital
• each case is evaluated individually
• included at earliest of receipt/accrual
• no unquantifiable amounts
• non-refundable deposits taxed in year of receipt
• horse-racing is income always
• gambling: once = capital, hobby = income.

Question 2

intention at?

Answer 2

acquisition, during holding period and at sale

Question 3

acquisition

Answer 3

• frequency of similar transactions
• nature of the TPs business
• objective set out in MOA

Question 4

holding period

Answer 4

• how long it was held
• continuity
• way that the asset was used

Question 5

sale

Answer 5

• marketing
• way that sale came about
• accounting treatment of proceeds (not conclusive)

Question 6

Nature of asset

Answer 6

• income = fruit, capital = tree
• sale of fixed assets = capital
• sale of floating assets = revenue

Question 7

intention of company

Answer 7

• speculation or scheme of profit-making = income, investment = capital
• s/h and directors should be attributed to the company

Question 8

selling at best advantage

Answer 8

• intention of TP at acquisition is crucial unless there was a change in intention
• every TP is entitled to realise assets to their best advantage without it being considered a change in intention

Question 9

realisation of a capital asset

Answer 9

• acquired with investment intention will remain capital even if disposal is due to unusual circumstances
• something more is needed to indicate cross of Rubicon

Question 10

Purpose

Answer 10

• dominant intention will indicate nature of proceeds

* mixed intention = income

Question 11

realisation company

Answer 11

• use doesn’t mean change in intention

Question 12

damages and compensation

Answer 12

• directed by performance to make profit = income

* directed at establishing an income-producing structure = capital