Capital Gains Tax

After Eddie's death, his wife Nomvula chooses to receive his monthly pension income. Who will be taxed on this income?

• Eddie

• Nomvula

Answer explanation

Even though the pension was Eddie’s, Nomvula becomes the annuitant once she elects to receive the income. It is now her income, and she is taxed on it, just like any other pension recipient.

Nomvula earned money from making earrings and hosting workshops. What type of income is this?

• Capital gains

• Remuneration

• Business/Trade income

• Exempt income

Answer explanation

Nomvula actively ran a small business, so this counts as trade income and is fully taxable (less expenses).

Nomvula received R15 000 in dividends from Poly (Pty) Ltd. How will this income be treated for tax purposes?

• Fully taxable

• Taxed at 20%

• Exempt from normal tax

• Added as a capital gain

Answer explanation

Dividends received are subject to a 20% dividends withholding tax, but they are exempt from normal income tax in the hands of the individual recipient.

The disposal of the old antique table constitues a disposal of small business asset.

• TRUE

• FALSE

Answer explanation

The disposal of the table does not constitute a disposal of a small business asset as Nomvula is below the 55 years of age requirement (par. 57)

Nomvula sold an old antique workshop table for R65 000, acquired for R21 000. It had no tax value. Advertising cost of R2 000 were incurred to find a buyer. What is the base cost of the table on disposal?

• R23 000

• R0

• R2 000

• R21 000

Answer explanation

The table has been fully written off, meaning the total capital allowances claimed is equal the original cost price of R21 000. Advertising costs are added to the base cost as they qualify as allowable expenditure (par. 20)
Base cost = R0 + R2 000 = R2 000

The vehicle sold is regarded as a personal-use asset, what are the CGT implications?

• Disregard the gain but account for any loss

• Account for any gain or loss

• Disregard any gain or loss

• Account for any gain but disregard any loss

Answer explanation

Any capital gain or loss realised on disposal of a personal use asset must be disregarded (par 53)

Nomvula sold her house for R3 980 000, which was inherited with a value of R1 200 000. What is her capital gain/loss?

• R2 780 000

• R780 000

• R0

• R1 200 000

Answer explanation

Remember! The R2 000 000 exclusion should apply to primary residences.

Nomvula sold her 12m sailboat for R150 000, which she bought for R300 000. What is the tax effect?

• R150 000 capital loss

• R300 000 capital gain

• R300 000 capital loss

• No capital gain or loss

Answer explanation

The sailboat is NOT a personal-use asset as it exceeds 10m in length, meaning any capital gain must be accounted for BUT disregard any capital loss on such asset (par. 15)

What is the annual capital gains exclusion and inclusion rate for Nomvula for 2025?

• R0 exclusion and 100% inclusion rate

• R40 000 exclusion and 80% inclusion rate

• R40 000 exclusion and 40% inclusion rate

• R0 exclusion and 40% inclusion rate

Answer explanation

Individuals get an annual R40 000 CGT exclusion to reduce their total capital gain or loss and include only 40% of their capital gains in taxable income.