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Capital or revenue in nature - Coggle Diagram
Capital or revenue in nature
Nature of the asset
George Forest Timber
Distinguishes Fixed Capital from Floating Capital.
Fixed capital forms the income-producing structure.
Floating capital is consumed in producing income.
The sale of fixed capital gives rise to capital proceeds,
while the sale of floating capital gives rise to revenue
Nel
Profit on sale remains capital unless buying and selling forms part of the taxpayer's trade.
Krugerrands are generally held as capital investments
Visser
Tree = Capital asset
Fruit = Income produced by the asset
The same asset may be capital for one taxpayer and trading stock for another
The same asset may be capital for one taxpayer and trading stock for another
Intention of the taxpayer
Stott
Where there are mixed intentions, the dominant purpose prevails.
Selling at a profit does not automatically convert capital into revenue.
Nel
The taxpayer's reason for selling is crucial
Sale to realise an investment remains capital in nature.
Pick 'n Pay Employee Share Purchase Trust
Revenue treatment requires a scheme of profit-making.
A profit made without such a scheme remains capital.
Capstone
For companies, intention is determined by those in effective control (directors/executive management).
Scheme of profit making
Pick 'n Pay Employee Share Purchase Trust
A deliberate profit-making scheme generally results in revenue receipts
Absence of such a scheme generally supports capital treatment.
Change of intention
John bells
Simply deciding to sell an asset does not indicate a change of intention.
A taxpayer may realise a capital asset at its best advantage
Natal Estates
A taxpayer changes from capital to revenue when they "cross the Rubicon" by embarking on a business or development scheme.
Extensive development and marketing indicate a profit-making scheme
Nussbaum
Repeated transactions can convert capital receipts into revenue receipts.
Frequent buying and selling may show that a taxpayer has moved from investing to trading.
Damages and compensation
Fourie Beleggings
Capital- Compensation for damage to the income-producing structure.
Compensation for loss of a capital asset.
Revenue-Compensation replacing profits or income.
Compensation for loss of trading income.