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CHAPTER 52
TAX IMPLICATIONS OF OWNING SHARES
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Taxation implications relating to shares and share related transactions
Steven Lever ©
Updated 05/2012
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1.OVERVIEW OF THE THIS SECTION
The next two chapters will explore the taxation legislation that relates to the calculation of taxable
income for shares and share related transactions.
This is split into two distinct sections, namely:
1. Taxation implications for the taxpayer that owns the shares
2. Taxation implications for the issuer of the shares
When looking at the taxpayer that owns shares, separate consideration will be given to:
 Share dealers owning shares for speculative reasons and
 Taxpayers holding shares for investment purposes
When looking at the taxation implications for the issuer of the shares, separate consideration will be
given to:


Taxation implications on issue of shares, and
Taxation implications when the company makes distributions to shareholders
2.GRAPHICAL REPRESENTATION OF THE OVERVIEW
TAXATION RULES FOR SHARES
TAXATION IMPLICATIONS FOR
THE HOLDER OF SHARES
TAXPAYERS HOLDING
SHARES FOR SPECULATIVE
REASONS SUCH AS
SHAREDEALERS
TAXPAYERS
HOLDING
SHARES AS AN
INVESTMENT
THIS IS COVERED IN
THIS CHAPTER
TAXATION IMPLICATIONS FOR
THE ISSUER OF SHARES
TAXATION
IMPLICATIONS
ON THE ISSUE
OF SHARES
TAXATION
IMPLICATIONS OF
DISTRIBUTIONS TO
SHAREHOLDERS
THIS IS COVERED IN
THE NEXT CHAPTER
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Taxation implications relating to shares and share related transactions
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3. REASONS FOR HOLDING SHARES
Taxpayers hold shares for many possible reasons.
These include:



Speculative reasons
Investment reasons
Business reasons
2.1 SPECULATIVE REASONS
Shares may be owned for speculative reasons where a taxpayer believes that profit will be made
through the trading of shares in the short term.
This could be a taxpayer that carries on the trade of a share dealer.
At the other extreme, it could be a taxpayer that buys shares in a scheme of profitmaking due to
receiving a share stock tip that a share was about to increase in value substantially.
Example of a share dealer/person buying shares in a scheme of profitmaking
A person receives a stock tip, and buys shares in a company for R100,000.
They then sell such shares for R180,000 3 months later at a substantial profit.
Consider this – As this is a scheme of profitmaking, the proceeds on the disposal of shares should be
included in gross income.
2.2 INVESTMENT PURPOSES
Certain taxpayers may hold shares for investment purposes and believe that returns may be found
through the long term holding of shares and the receipt of dividends over time..
Such taxpayers will obtain returns through the receipt of dividends and the capital appreciation
made on the ultimate disposal of shares.
Example of shares held for investment purposes
A taxpayer buys shares for R100,000 with the intention of holding the shares for a substantial period
of time. He believes that the accumulated dividends plus the eventual selling price of the shares will
lead to an investment that will deliver an excellent investment return over the next 10 to 15 years.
The taxpayer never changes his intention and upon retirement sells his shares. The taxpayer sells the
shares in the current year for R450,000 (thus holding the shares for a long period of time). During
the many years the shares were owned by the taxpayer, dividends of R80,000 were received from
time to time.
Consider this – The proceeds on disposal of the shares will be treated as proceeds for capital gains
purposes.
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Taxation implications relating to shares and share related transactions
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Business reasons
Shares may also be held for a business purpose. Consider where shares may be bought for the
following reasons:



The company has a government license to do something that your company has no ability to
receive a license for. Thus if you wanted a license to run a public TV service, you may
consider buying ETV.
The company is a supplier of yours and you want to secure a continuous supply of raw
materials.
The company is in the same industry as yours and you want to buy a competitor. (SA
Breweries buying Miller)
The above 3 situations are an example of many such types of transactions where shares are bought
for a business purpose. The business purpose the shares are bought for is generally not speculative,
and such shares will be held as investments.
Each of the above will be discussed individually.
3. DEDUCTIBILITY OF EXPENSES IN RESPECT OF SHARE
OWNERSHIP
Section 23(f) states that an expense may not be claimed in instances where there is no underlying
income.
It is necessary to understand the term income.
Income = Gross income minus Exempt Income.
Consider the following:
 A taxpayer buys a share as an investment, and takes out a loan to buy the shares
 Interest of R7,000 is paid in the current tax year on this loan
 A local dividend of R10,000 is earned
The taxation implications will be as follows:
 R10,000 local dividend is gross income
 R10,000 local dividend is exempt
 Income = R10,000 – R10,000 = R0.
 As income is R0, the deduction for the interest is not allowed as section 23(f) does not allow this
deduction to be claimed.
If the above example were changed by adding the following dynamic:
 The shares were acquired for speculative reasons for R100,000
 The shares were sold for R130,000
The solution would change as follows:
 R10,000 local dividend is gross income
 R10,000 local dividend is exempt
 R100,000 purchase price of the shares will be allowed as a deduction of trading stock
 R130,000 selling price would be included in gross income as this is the amount collected on the
sale of this trading stock.
 Interest of R7,000 would be allowed as a deduction, being an amount incurred in the production
of income not of a capital nature.
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Taxation implications relating to shares and share related transactions
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If shares are bought for business reasons, in most circumstances the interest will be deductible. This
may occur in the following circumstances:
 Buying shares in a competitor
 Buying shares in a supplier
 Buying shares in a company that has a business license you want to use
 Buying shares in a company that owns a patent you want to use in your business
 Buying shares in a company that owns a trade name you want to use in your business
Thus if a small hotel chain bought “holiday inn” so that they could rename all their hotels holiday
inn, the interest on the loan to acquire the shares would be deductible.
Each case should however be assessed on its merits.
ILLUSTRATION 3B
For each of the following indicate whether the expense is deductible
1. Investor (not a share dealer)incurs interest of R10,000 for a loan used to specifically buy shares
in B Ltd. B Ltd earned dividends of R15,000.
2. Share dealer incurs interest of R10,000 for a loan used to specifically buy shares in B Ltd. B Ltd
earned dividends of R15,000.
3. Investor (not a share dealer)incurs interest of R10,000 for a loan used to specifically buy shares
in B Ltd. B Ltd earned dividends of R15,000. The shares were bought in a competitor so that the
company could obtain synergistic benefits in respect of cost cutting between the companies (1
debtors department not 2, 1 sales department not 2, etc.).
SUGGESTED SOLUTION TO ILLUSTRATION 3B
1. R15,000 dividend is gross income, but full R15,000 is an exempt local dividend. This income =
R15,000 – R15,000 = 0. As there is no income, there is no deduction for the R10,000 interest
incurred.
2. R15,000 dividend is gross income, but full R15,000 is an exempt local dividend. This income =
R15,000 – R15,000 = 0. However as a share dealer will include the proceeds on disposal of the
shares into gross income, the R10,000 interest will be allowed as a deduction.
3. R15,000 dividend is gross income, but full R15,000 is an exempt local dividend. This income =
R15,000 – R15,000 = 0. However as the shares were acquired for business purposes (cost cutting
synergistic benefits), the R10,000 interest will be allowed as a deduction.
Other expenses related to ownership of shares would have similar rules.
Consider brokers fees. For a share dealer, these brokers fees would be treated as a deduction for
taxation purposes, whilst for a person holding shares as an investment, the brokers fees on sale
would be added to the base cost. Selling expenses are added to the base cost for transactions that
involve capital gains.
There would have to be a link between the ownership of the shares and the expense incurred by the
taxpayer.
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Taxation implications relating to shares and share related transactions
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4.PRINCIPLES RELATING TO INCOME AND DEDUCTIONS FOR
HOLDERS OF SHARES
4.1SHARE DEALERS
Share dealers acquire shares for speculative purposes.
4.1.1Gross income implications for share dealers
Such taxpayers receive various receipts from the company. These are:



Dividends received on shares in the normal course of business, and
The proceeds on disposal of shares when shares are sold, and
Amounts paid to the share dealer by the company that are not dividends in the normal
course of business. Examples of this are share buybacks and amounts received on liquidation
or deregistration of the company.
Dividends
Dividends are included in gross income. Paragraph k of the gross income definitions specifically
includes dividends into gross income.
Proceeds on sale of shares
Proceeds from the disposal of shares by a share dealer will also be gross income. This is due to the
fact that shares owned for speculative purposes
Consider the example where




a share dealer buys shares with speculative intent for R100,000
He sells the share 3 months later for R180,000,
This is paid to him by his broker in cash.
The gross income definition includes the R180,000 amount into gross income if:
Requirements of the
gross income definition
Discussion of whether the type of income is included in gross income
The total amount
There is an amount of value received for the share sale. It is R180,000
In cash or otherwise
The amount of R180,000 was received in cash
Received by or accrued
to the taxpayer
The taxpayer has received an amount of R180,000 for his own benefit
(Alternately the taxpayer is unconditionally entitled to receive R180,000)
Not of a capital nature
The intention of the taxpayer was a scheme of profitmaking – holding
the shares speculatively and selling them at a profit.
Thus the R180,000 will be gross income.
Summarising for share dealers, who have bought shares with speculative intent


When local dividends are received, such dividends are included in gross income. Such
dividends may also be exempt from income.
Proceeds on the disposal of shares are included in gross income when the shares are sold.
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Taxation implications relating to shares and share related transactions
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Liquidation and deregistration of an enterprise
There is an amount that is payable to shareholders once a company has been liquidated or
deregistered.
Consider the following:



The total amount distributed to shareholders is equal to all the reserves plus pure share
capital once all assets have been paid and liabilities have been settled.
Note that this is because of the accounting equation where OWNERS EQUITY = ASSETS LIABILITIES
How much has been received as a dividend and how much has been received from a return
in capital will need to be determined to establish:
o How much dividends tax is payable,
o How much dividends has the owner of the shares received.
o How much return on capital has the owner of the shares received.
4.2 EXEMPT INCOME IMPLICATIONS FOR SHARE DEALERS
Local dividends received by sharedealers are exempt from dividends in most circumstances. An
exception for this is that up till 1 April 2012, any dividends received by a share dealer on buyback of
shares will not be exempt for tax purposes.
4.3 DEDUCTIBILITY OF EXPENSES
As share dealers are carrying on a trade to produce income, any expenses actually incurred not of a
capital nature will be deductible.
5.SHARES HELD FOR INVESTMENT PURPOSES
5.1 GENERAL
Units help in equity unit trusts and property unit trusts will in most circumstances be held for
investment purposes, rather than in a scheme of profitmaking.
For shares owned by a taxpayer directly, one should consider the intention of the taxpayer upon
buying the shares.
This section covers the situation where shares were bought for investment purposes, where return is
received in the form of dividends and long term capital appreciation.
5.2 GROSS INCOME AND EXEMPT INCOME TAX IMPLICATIONS
Local dividends are included in gross income, but are exempt in terms of section 10(1)(k) of the Act.
Normal rules for unit trusts will apply.
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Taxation implications relating to shares and share related transactions
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5.3 CAPITAL GAINS
The proceeds on disposal of investment shares will be treated as proceeds for capital gains
The base cost of shares will be the amount paid on acquisition of the shares. 1/3 (one third) of
interest paid on the acquisition of listed shares may also be added to the base cost.
5.4 DEDUCTIBILITY OF EXPENSES
As the investment produces dividend income that is exempt from income, the expenditure is not
allowed as a deduction unless there is a business reason for the expense.
See the section previously on deductibility of expenses.
6. SECTION 9C
Section 9C deems the disposal of a share to be capital in nature if it has been held by the taxpayer
for 3 years or more.
The application of this section is not optional. Any share held for 3 years or more will automatically
become capital.
Shares are deemed to be held on a FIFO basis when determining the 3 year period.
Even a share purchased for speculative reasons, that remains to be held speculatively, the disposal
of the share will be treated as capital in nature by application of this section.
Section 9C is activated on disposal of trading shares. Shares continue to be treated as speculative
until actual disposal takes place.
The disposal will then be treated as a disposal for capital gains purposes and the base cost of the
share will be determined using the deductions that have now been reversed.
ILLUSTRATION 6A
A Ltd has a December year end. A Ltd bought 100,000 shares in B Ltd for speculative reasons on 1
November 2009 for R100,000.
The shares were held for speculative purposes. The shares were sold as follows
 On 16 October 2011, 30,000 shares for R57,000
 On 12 December 2012, 50,000 shares for R88,000
 on 15 March 2013 20,000 shares for R42,000.
What are the tax implications from 2009 to 2013 years of assessment?
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Taxation implications relating to shares and share related transactions
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SUGGESTED SOLUTION TO ILLUSTRATION 6A
CGT
Income/Expense
2009
Purchases deduction
Closing stock
(100,000)
100,000
2010
Opening stock deduction
Closing stock income
(100,000)
100,000
2011
Opening stock deduction
Gross income
Closing stock income
(100,000)
57,000
70,000
2012
Opening stock deduction
Reversal stock deduction section 9C
Proceeds CGT
Base cost
Closing stock income
(70,000)
50,000
88,000
(50,000)
20,000
2013
Opening stock deduction
Reversal stock deduction section 9C
Proceeds CGT
Base cost
(20,000)
20,000
42,000
(20,000)
All deductions that have been claimed on the shares disposed will be reversed.
Shares are deemed to be held on a FIFO basis when determining the 3 year period.
If a listed share is owned, and interest has been incurred on this share, 1/3 (one third) of the interest
may be capitalized into the base cost of the shares.
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Taxation implications relating to shares and share related transactions
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ILLUSTRATION 6B
Mr Camel, a sharedealer, bought shares in Marlboro Limited, a company listed on the JSE. The
shares were acquired as follows:
 10,000 shares were acquired for R50,000 on 1 February 2009
 15,000 shares were acquired for R90,000 on 31 May 2010
 Sold 4,000 shares on 18 September 2010 for R90,000
 Sold 8,000 shares on 12 February 2012 for R160,000
Mr Camel took out a loan to acquire the 1st tranche of shares. The loan was repaid on 25 July 2010
after R10,000 interest had been paid on the loan.
Calculate the taxable income for the February 2012 year end
SUGGESTED SOLUTION TO ILLUSTRATION 6B
2012 tax year
Opening stock deduction tranche 1 6,000/10,000 X R50,000
Opening stock deduction tranche 2
Section 9C – Reversal of interest paid 6,000/10,000 X R10,000
Section 9C – shares held over 3 years sold
Proceeds 6,000/8,000 X R160,000
Base cost
Base cost 1/3 X 6,000 (interest on listed company)
Gross income 2,000/8,000 X R160,000
Closing stock 13,000/15,000 X R90,000
(30,000)
(90,000)
6,000
30,000
120,000
(30,000)
(2,000)
40,000
78,000
Note that shares transactions must use the first in first out (FIFO) basis for section 9C.
ILLUSTRATION 6C
Mr Albertyn, a share dealer, had the following transactions for his shareholding in BHP Ltd, an
unlisted company Billiton, a company listed on the JSE.
He bought 7,000 shares were bought in BHP Ltd on 1 February 2010 for R70,000. Another 3,000
shares were purchased on 26 February 2010 for R45,000.
A loan was taken out to buy the 7,000 shares and interest of R2,000 was claimed as a deduction in
the 2010 tax year and R10,000 in the 2011 tax year when the loan was repaid.
2,500 shares were sold on 15 January 2013 for R74,000 and 5,500 shares were sold on 16 February
2013 for R125,000.
What are the tax implications for the 2010 – 2013 tax years for the shareholding in B (Pty) Ltd
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Taxation implications relating to shares and share related transactions
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SUGGESTED SOLUTION TO ILLUSTRATION 6C
CGT
Inc/Expense
2010 tax year
Purchases deduction
Purchases deduction
Interest deduction
Closing stock
(70,000)
(45,000)
( 2,000)
115,000
2011 tax year
Opening stock deduction
Interest deduction
Closing stock
(115,000)
10,000
115,000
2012 tax year
Opening stock deduction
Closing stock
(115,000)
115,000
2013 tax year
Opening stock
Gross income on sale of the shares (held for less than 3 years)
Gross income
only 1,000 out of 5,500 shares held for less than 3 years
FIFO basis applies – 1,000/5,500 X 125,000 = 22,727
Proceeds = 102,273 (4,500/5,500 X 125,000
Base cost = 45,000 (4,500/7,000 X 70,000)
Reversal of opening stock deduction
45,000 treated as income (4,500/7,000 X 70,000)
Reversal of interest deduction = 7,714
(4,500/7,000 X 12,000) added to income
Closing stock added to income
(2,000/3,000 X 45,000)
(R115,000)
R 74,000
R 22,727
102,273
(45,000)
45,000
7,714
30,000
Note that even though the closing stock has been held for more than 3 years, it will be treated as a
trading share until disposal. The stock deduction is only reversed on disposal of the shares.
Interest is not capitalised into base cost as the company that he invested in is not listed.
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Taxation implications relating to shares and share related transactions
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7. COST OF A CAPITALISATION SHARE
Capitalisation issues are not dividends as defined.
As they are not treated as dividends, these shares have a nil cost. Also consider that shares are
valued on a FIFO basis for section 9C.
ILLUSTRATION 7A
Horror Ltd own 1,000 shares in Suspense Ltd that cost R102,000. These shares were acquired on 12
January of the current year for R10,000. On 23 March, Suspense Ltd had a 1:1 capitalisation issue.
On 29 July, 1,600 shares in Horror Ltd were sold for R90,000. At year end the shares were trading at
R8 a share.
Horror Ltd has an August year end. What are the tax implications of the above.
SUGGESTED SOLUTION TO ILLUSTRATION 7A
Purchases deduction
Capitalisation issue (not a dividend)
Sale of shares – Gross income
Closing stock – 400 shares at R0 cost (FIFO used)
(102,000)
0
90.000
0
8.WRITEDOWN OF SHARES
Shares are trading stock to a share dealer. Usually trading stock is valued at the lower of cost or net
realisable value, but for shares, trading stock cannot be written down.
ILLUSTRATION 8A
Horror Ltd own 10,000 shares in Suspense Ltd that cost R102,000. These shares were acquired on 12
January of the current year for R102,000. On 23 March, Suspense Ltd had a 1:1 capitalisation issue.
At year end, the shares were trading at R8 a share.
Horror Ltd has an August year end. What are the tax implications of the above.
SUGGESTED SOLUTION TO ILLUSTRATION 8A
Purchases deduction
(102,000)
Capitalisation issue (not a dividend)
0
Closing stock 10,000 original shares cost R102,000 MV R80,000 no write-down 102,000
Closing stock – 10,000 cap issue shares at R0 cost
0
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Taxation implications relating to shares and share related transactions
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9. TEACHING EXAMPLE
A Ltd is a share dealer that has a 30 June 2013 financial year end. The following details are relevant
to A Ltd:
Closing stock last year
Share
10,000 shares in B Ltd
8,000 shares in C Ltd
12,000 shares in C Ltd
10,000 shares in E Ltd
Date acquired
14 April 2011
25 July 2009
17 August 2011
16 April 2005
Cost on acquisition
R100,000
R40,000
R75,000
R300,000
Market value
beginning of year
R160,000
R30,000
R45,000
330,000
The shares in E Ltd were bought after taking out a loan from the bank. Interest of R30,000 was paid
on the loan in the 2005 – 2008 tax years. E Ltd is a listed company.
In addition to the above, the company had a non trading share portfolio where shares were held for
capital purposes as investments.
Investment share
Date acquired
Cost on acquisition
Market value
beginning of year
5,000 shares in D Ltd
15 January 2012
R125,000
R80,000
Dividends of R23,000 was received was declared and paid by B Ltd to the company on 18 December
2012.
Dividends of R10,000 were declared to the company by C Ltd on 17 June 2013 to shareholders
registered on 2 July 2013, payable on 14 July 2013.
On 17 September 2012, B Ltd bought back 2,000 shares in B Ltd for R35,000. Each share in B Ltd had
a share capital of R2 and the directors decided to use R2 as the contributed tax capital per share..
Various shares in C Ltd were sold:
 2,000 shares in C Ltd were sold on 2 July 2012 for R38,000.
 7,000 shares in C Ltd were sold on 15 January 2013 for R140,000.
In addition, 2,000 shares in D Ltd were sold for R83,000.
Interest of 6,000 was paid this year on a loan taken out to buy shares in D Ltd.
The whole shareholding in E Ltd was sold for R510,000 on 13 March of the current year.
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Shares acquired during the year
3,000 shares were acquired for trading purposes in Z Ltd for R30,000. Z Ltd had a 1:1 capitalisation
issue and thereafter the company sold 4,000 shares for R25,000.
2,000 shares were acquired in Y Ltd for share dealing purposes on 15 July 2012 for R39,000. Brokers
fees of R1,000 were paid on acquisition.
On 1 January, when the share price was R25 a share, A Ltd decided to move the shares from the
trading portfolio to the investment portfolio. On 27 June 2013, 100 shares in Y Ltd were sold for
R4,000.
On 28 August, 5,000 shares in X Ltd were acquired for the investment portfolio at a cost of R50,000.
On 1 January when the value of the shares was R72,000, the company decided that X Ltd should be
part of the share dealing portfolio of shares.
Calculate the taxable income of A Ltd.
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Taxation implications relating to shares and share related transactions
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SUGGESTED SOLUTION TO TEACHING EXAMPLE - SHAREDEALERS
CGT
Opening stock B Ltd
Opening stock C Ltd
Shares in D Ltd
Shares in E Ltd
Dividend received B Ltd
Local dividend exempt
Dividend received C Ltd
Companies are not
allowed to write down
shares held as trading
stock
This is not treated as
trading stock as it is part
of the investment
portfolio in the company
and is not held for
trading purposes.
Until the date of sale, the
3 year rule is not applied.
Thus even though these
shares have been held
for greater than 3 years,
they are treated as
trading stock till the date
of sale
Deduction
Income
(100,000)
(115,000)
0
(300,000)
23,000
(23,000)
Not included in the
current year as the last
date to register was after
year end
0
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CGT
Share buyback B Ltd
Deduction
Income
Shares held less than 3
years thus 9C does not
apply
Gross income
Return of share capital is
R2 X 2,000 shares =
4,000.
Dividend
Dividend is total received
of R35,000 less share
capital of R4,000.
Dividend exemption
There is no dividend
exemption for a share
dealer where shares are
bought back.
4,000
31,000
(0)
It should be noted that if
the shares had been held
for more than 3 years, as
per section 9C, the
R31,000 be exempt as
the share would be
treated as capital.
Closing stock B Ltd
Sale of shares in C Ltd on 2
July 2011
Sale of shares in C Ltd on 15
January 2012
B Ltd shares 6,000 left
after 2,000 bought back
8,000/ 10,000 X 100,000
80,000
Shares valued on FIFO
basis for section 9C to
apply. Thus first in is first
out.
Sale 2,000 shares
Shares not yet held for 3
years thus gross income
Next 6,000 shares on
FIFO basis were held for
more than 3 years thus
not gross income
38,000
0
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CGT
C Ltd Section 9C
C Ltd
120,000
C Ltd
Base cost
(30,000)
C Ltd
The next 1,000 shares
are from the next
acquisition. These have
not been held for 3 years
and the sale is subject to
gross income.
1,000/7,000 X 140,000 =
20,000
C Ltd shares
11,000 left after 1,000
shares sold
11,00/12,000 X 75,000
Interest on loan D Ltd
Sale of shares in D Ltd
Closing stock D Ltd
E Ltd Section 9C
E Ltd Section 9C
E Ltd Proceeds on sale
E Ltd Base cost
20,000
68,750
D Ltd is part of the
investment portfolio thus
the interest on the loan
is not tax deductible.
Capital as shares formed
part of an investment
portfolio
Proceeds
Base cost 2/5 X 125,000
(0)
83,000
(50,000)
Investment shares not in
closing stock
Reverse stock deduction
for E Ltd as shares now
sold and held for greater
than 3 years
Reverse interest
deduction for E Ltd
shares as interest
deduction cannot be
claimed on capital shares
Stock reversal
Income
30,000
Proceeds on disposal
6,000/7,000 X 140,000
Closing stock C Ltd
Deduction
Reversal of opening stock
deduction 6,000/8,000 X
40,000 = 30,000
300,000
30,000
510,000
(300,000)
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CGT
E Ltd Base cost interest
Capitalise 1/3 of interest
paid on listed shares thus
30,000 X 1/3
Deduction
(10,000)
Sale of Z Ltd shares
Purchase of 3,000 Z Ltd
shares
Closing stock Z Ltd
25,000
Purchase deduction
(30,000)
Capitalisation issue
shares have a nil cost.
Shares are treated on a
FIFO basis.
Purchase Y Ltd shares
Deemed sold at market
value of R25
Sale Y Ltd shares
Proceeds
Base cost 100 X 25
Closing stock Y Ltd
Part of the investment
portfolio after change of
intention thus not
included in closing stock
Change of intention X Ltd
shares
0
Purchase deduction
Purchase deduction Brokers fees
Change intention Y Ltd
shares
Deemed disposal when
intention changed – Shares
in X Ltd
Proceeds
Base cost
(39,000)
(1,000)
50,000
4,000
(2,500)
0
72,000
(50,000)
Deemed acquisition at
market value. Thus
opening stock deduction
(72,000)
Closing stock X Ltd
Capital gains inclusion
Taxable income
Income
72,000
355,500
X 66,6666%
237,000
XXXXX
18
Taxation implications relating to shares and share related transactions
Steven Lever ©
Updated 05/2012