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When a company is delisted and liquidated, does this trigger a tax event?

And could I claim losses against my capital gains in the respective tax year?

I have managed to step on a few landmines over the past few years, including the likes of Group 5 and Intu. These two companies have gone into business rescue and have been delisted from the JSE, following a spectacular crash in their share prices.

I am curious, from a capital gains tax perspective, what happens when these companies are delisted and ‘liquidated’? Does this trigger a tax event and could I claim these losses against my capital gains in the respective tax year?

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This is a great question, as it is commonly understood that one can claim a capital loss as a deduction for tax purposes in the event of a disposal at a price which is less than that of the purchase price. However, in the event that the shares are not sold, and the company is placed into business rescue or delisted, is this still seen as a disposal by the South African Revenue Service (Sars)?

Does this trigger a tax event?

According to the Sars Tax Guide for Share Owners (Issue 7):

A disposal will normally occur when shares are sold, but a person will also be treated as having disposed of them if:

  • they are donated;
  • a person ceases to be a resident;
  • the nature of the shares changes from capital assets to trading stock;
  • the shares are still owned at the time of death and were not bequeathed to a surviving spouse or an approved public benefit organisation;
  • the company in which the shares are held is liquidated or deregistered; or
  • a return of capital or foreign return of capital is received or accrued on or after April 1, 2012 and exceeds the base cost of the shares.

Based on the above excerpt, you are able to deduct your losses in Group Five and Intu against your taxable income.

Could I claim these losses against my capital gains in the respective tax year?

You are able to deduct the capital loss in the financial year in which the disposal takes place. If you have yet to deduct the capital loss, it can be carried forward and used to offset against future tax liabilities.

You can download a copy of the Tax Guide for Share Owners (Issue 7) by clicking here.

 

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COMMENTS   3

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I too had INTU shares. From R90 to R0 – how fast can you GO?

No news about INTU, the 17 or so shopping malls are still operating in the UK, but the share holders are having lollie pops for lunch and dinner.

@TheSpeculator….

The same guy who was warning everyone that BTC was a ‘scam’ just took a severe beating on the old school share market.

The irony !!

Don’t stress, I did not lose the shirt on my back, lesson learnt.

You might lose yours, go big on BTC.

End of comments.

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