QQuestionAccounting
QuestionAccounting
On 24 August 2024, Mr. Jacobs, a retired businessman aged 67, died in a motor accident. He was
married out of community of property to his wife Sara (both are resident in South Africa).
On 24 August 2024 he owned the following assets:
1. An Audi convertible with a market value of R^850 000. He bought the car on 1 January 2024 for R^1
380 000. This motor vehicle was bequeathed to his son, Rami.
2. A holiday flat in Plettenberg Bay with a market value of R^4,5 million. He had purchased the flat on
1 May 2001 for R^2,75 million. The market value on 1 October 2001 was R^3.4 million. In his
valid will he bequeathed this asset to the Rahman Family Trust. The time apportionment based cost
is estimated at R^3.1 million.
3. A 12 metre long yacht with a market value of R^3.4 million. It had originally cost him R^4.6 million
in 2017. This yacht was bequeathed to the Sailing for Youth Foundation, an approved public benefit
organisation.
4. His Gold Krugerrand coin collection with a market value of R^750 000. This were originally
purchased by his father for R^150 000 and had a market value of R^450 000 when Mr Rahman
inherited the coins on 1 September 2011. He bequeathed this collection to his surviving spouse.
5. His primary residence in Constantia with a market value of R^7.5 million. He owned this property
jointly with his wife i.e. each owned 50%. They had purchased the property on 30 June 1998 for
R^2.2 million. The market value on 1 October 2001 was R^3.45 million. In his will he left his share to
his daughter on condition that she did not attempt to sell it until the death of his wife.
REQUIRED:
Calculate Mr Jacobs' taxable capital gain for the 2024 year of assessment. Give reasons if any
exclusions applied.
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Answer
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Step 1:: Determine the cost price and market value of each asset owned by Mr.
Jacobs at the time of his death.
Step 2:
Audi convertible: - Cost price: R^1,380,000 - Market value: R^850,000
Step 3:
Holiday flat in Plettenberg Bay: - Cost price: R^2,750,000 - Market value: R^4,500,000 - Time apportionment based cost: R^3,100,000
Step 4:
Yacht: - Cost price: R^4,600,000 - Market value: R^3,400,000
Step 5:
Gold Krugerrand coin collection: - Original cost price (inherited): R^150,000 - Market value when inherited: R^450,000 - Current market value: R^750,000
Step 6:
Primary residence in Constantia (shared with his wife): - Cost price: R^2,200,000 (assuming equal sharing) - Market value: R^7,500,000 (assuming equal sharing) - Market value on 1 October 2001: R^3,450,000 (assuming equal sharing)
Step 7:: Calculate the capital gain or loss for each asset.
Step 8:
Audi convertible: - Capital loss: R^1,380,000 - R^850,000 = R^530,000
Step 9:
Holiday flat in Plettenberg Bay: - Capital gain (using time apportionment cost): R^4,500,000 - R^3,100,000 = R^1,400,000
Step 10:
Yacht: - Capital loss: R^4,600,000 - R^3,400,000 = R^1,200,000
Step 11:
Gold Krugerrand coin collection: - Since this was inherited, the capital gain or loss is not calculated for the 2024 year of assessment.
Step 12:
- Capital gain (using 1 October 2001 market value): $$\frac{1}{2}(R7,500,000 - R3,450,000) = R2,025,000
Primary residence in Constantia: - Since this asset is jointly owned, only half of the capital gain or loss is calculated for Mr. Jacobs.
Step 13:: Calculate the total taxable capital gain for the 2024 year of assessment.
- Total taxable capital gain: R^530,000 (Audi) + R^1,400,000 (Holiday flat) + R^1,200,000 (Yacht) + R^2,025,000 (Primary residence) = R^5,155,000
Final Answer
Jacobs' taxable capital gain for the 2024 year of assessment is R^5,155,000.
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