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Capital in Nature vs Revenue in Nature - Coggle Diagram
Capital in Nature vs Revenue in Nature
Definitions and General Principles
Capital in Nature
Not part of the initial calculation for normal tax purposes
Might be included in capital gains tax calculation later
Excluded from gross income unless under special inclusion or capital gains tax
Revenue in Nature
Taxable, included in gross income
Key Court Cases and Principles
Visser
Principle
Income is what capital produces
Issue
Capital: Tree
Revenue: Fruit
Judgement
Produced goods: Revenue in nature
Machinery: Capital in nature
George Forest Timber Company Limited
Principle
Fixed vs. Floating Capital
Issue
Fixed Capital Not revenue in nature
Example: Machinery
Judgement
Floating Capital Revenue in nature
Example: Merchandise, Trading Stock
Nel
Issue
Whether the compensation is capital or revenue
Judgement
Compensation for the restraint of trade is capital in nature, as it relates to the loss of a capital asset (right to trade). Not taxable.
Principle
Determining the nature of compensation under a restraint of trade agreement
Intention
Company
Continuity Test
Directors' Actions
Natural Person
Ipsa dixit (frame of mind)
Actions must support stated intention