PART A

Wood Ltd is a furniture manufacturer. The companys year of assessment ends on 31 March and it is not regarded as a small business corporation or micro business as defined in the Income Tax Act. Wood Ltd sold an office building (which was no longer in use) for R3 500 000 on 1 January 2016. The building was acquired for R3 250 000 on 1 March 2008 and Wood Ltd incurred transfer costs of R90 000. Wood Ltd was not able to claim any capital allowances on this office building On 1 February 2016, a manufacturing machine was stolen from the companys factory. The machine was purchased new on 20 November 2014 at a cost of R620 000. The total capital allowances claimed on the manufacturing machine until 1 February 2016 was R372 000. The company was insured for the full replacement cost of the machine and the insurers paid out an amount of R680 000 on 25 February 2016. Wood Ltd has an assessed capital loss of R12 000 brought forward from the previous year of assessment.

Required: Calculate the taxable capital gain/loss of Wood Ltd for the 2016 year of assessment.

PART B (8) Buildex (Pty) Ltd sold a factory building for R8 250 000 on 1 November 2015 and its tax value at this date was R1 050 000. The company acquired the factory building at a cost of R4 200 000 on 1 September 2001 and brought it into use directly in a process of manufacturing at the same date. Assume that the adjusted proceeds for capital gains tax purposes are R5 100 000. Valuation costs of R7 000 were paid to a sworn appraiser who determined the market value of the building to be R900 000 as at 1 October 2001. The time-apportionment base cost of this asset is R800 000. Buildex (Pty) Ltds year of assessment ends on 31 December 2015. Required: Calculate only the amount of the base cost of the building, which will form part of the capital gains tax calculation for Buildex (Pty) Ltds 2015 year of assessment.