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Receipts or accruals of a capital nature, How do you determine nature? -…
Receipts or accruals of a capital nature
Specifically excluded from gross income definition
May be included by proviso to gross income definition + CGT
Notions of "capital" or "revenue" not defined in ITA
Rich tapestry of case law
Income is either capital or revenue; no half-way house
Receipt of amount not matched by sale of asset = revenue nature
Examples of specific assets
sale of business (NIKO case)
damages and compensation
WJ Fourie Beleggings + SFW cases
crypto currency + Krugerrands
fortuitous gains
gambling
illegal business
loans
realisation companies (Founders' Hill / AECI case)
How do you determine nature?
Decision of whether amount is capital or revenue arises on sale of asset
Fruit and the tree analogy (Visser case)
Context is key = books a capital to lawyer; but trading stock to bookseller
Fixed vs floating capital
George Forrest Timber Co case
Intention = dominant test
Stott case
Asset held as investments vs assets held for speculative purposes
Profit-making scheme = Pick 'n Pay Employee Share Purchase Trust + Capstone 556 cases
Work for profit; not fortuitous
Mixed intentions (Levy and Glass cases)
Intention of a natural person (ipse dixit vs surrounding facts and circumstances)
Intention of a company
Company objects; constitutional documents; board minutes (Richmond case: company has no body nor soul to damn)
Continuity
Change of intention
John Bell and Co (something more required, sale at best advantage or profit not sufficient)
Natal Estates: list of non-exhaustive factors to consider when determining whether there is "something more"
Elandsheuwel Farming case: change in shareholding of a company and new shareholder policy and track record
Onus on taxpayer = s102 of Tax Admin Act
length of time asset held
frequency
TP's ipse dixit
nature of TP's business
income stream
reason for sale
financing of asset acquisition