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Capital / Revenue in Nature - Coggle Diagram
Capital / Revenue in Nature
CIR v Visser
The nature of the asset
Income produced from an income-producing asset is revenue in
nature while the income-producing asset, itself, is capital in
nature.Principle: Tree vs Fruit. Income is what capital produces
Natal Estates Ltd v SIR
Change of intention
Principle: A taxpayer needs to be carefull not to cross the rubicon
and embark on a scheme of profit making
Despite a taxpayer being entitled to realise his/her asset at its full
advantage, if the totality of the facts indicates that the taxpayer
has "crossed the Rubicon" and embarked on a profit making
scheme, the asset will be revenue in nature
COT v Levy
Intention - mixed intentions
Principle: In cases of mixed investment and speculative intentions, the dominant intention prevails. If it is impossible to determine the dominant intention, the transaction is classified as revenue.
Whether an amount is classified as income or capital depends on the taxpayer's intention when the property was acquired.
The taxpayer's main or dominant intention when acquiring the property must be established. The possibility of making a profit from a future sale does not have to be completely ruled out.
Pick 'n Pay Employee Share Purchase Trust
Scheme of profit making
Principle: A scheme of profit making is essential to classify
proceeds as revenue in nature.
Receipts and accruals are assumed to be capital in nature
unless the taxpayer entered a scheme of profit making, in which
case they will be revenue in nature
CIR v Stott
Change of intention
The Taxpayers intention on Aquisition of the asset is decisive
unless some other factor intervenes which indicates a change in
intention
A taxpayer is always entitled to realise his/her assets at their
best advantage
Principle: The Intention of the taxpayer, change in intention
John Bell v SIR
Change of intention
Actively marketing or promoting the sale of a property indicates a revenue-generating activity, meaning the proceeds are likely to be classified as revenue.
Principle: Something more is required to indicate a change in
intention
George Forest Timber Co Ltd
Fixed capital remains intact and creates wealth
Proceeds from fixed caipital (machinery) = CAPITAL
Proceeds from floating capital merchandise equals REVENUE
Principle: Fixed vs Floating capita