House sale One of the directors of SendIT Limited, Dillon Ceasar, is considering emigrating from South Africa to Namibia. He currently lives in Stellenbosch with his wife, to whom he is married in community of property. Although they also own a house in Namibia, they always regarded their Stellenbosch house as their primary residence. The house was acquired through a donation from Dillons grandfather on 1 October 2009 and formed part of the couples joint estate. Donations tax amounted to R361 087 and was paid by Dillons grandfather. The market values of the house amounted to R2 150 000 on 1 October 2009 and R6 500 000 on 1 February 2022.

Dillons wife, Nicole, operates a small business, selling second-hand books, from their house. A room of 35m is used exclusively in her trading operations. The house covers an area of 480m in total. Nicole has been utilising the space in her trade since Dillon acquired the house. SendIT Limited considers purchasing the house from Dillon. The house will then be provided to an employee of SendIT Limited as residential accommodation.

General information: The straight-line depreciation method is used on all asset classes. Property (Land & Building) is recognised using the revaluation model and is reval-ued at the end of every third year. Accumulated depreciation is eliminated at each revaluation date, and the revaluation surplus is released only on the disposal of the asset. Courier vehicles and computer equipment is recognised according to the cost model. The residual value on all assets is insignificant unless otherwise stated. Assume the residual value and useful life estimates have been reviewed every year and have remained unchanged. The companys cost of capital is 11%. Assume an income tax rate of 28% and 80% of capital gains are taxable.

REQUIRED:

1.8) With reference to the House sale, discuss the normal tax implications for Dillon Ceasar regarding the proposed disposal of the house in Stellenbosch. You may assume that the house was sold to SendIT Limited for R6 500 000 on 1 February 2022 and that this was the only disposal by Dillon Ceasar during the 2022 year of assessment.