Consideration Received Section 37 of the Income Tax Act, 2015 (Act 896) defines consideration received as the amount derived by a person from owing an asset and this includes an amount derived from altering the value of that asset and in the nature of a covenant to repair that asset and an amount derived by that person or an entitlement for that person to derive an amount in the future in respect of realizing that asset. Under section 50(2) where a person realizes more than one asset at the same time by way of transfer or as part of the same arrangement, the amount derived in realizing each asset is apportioned between the assets according to the market value of each of the assets at the time of realization. Ravid Ghana limited received GHS200,000 from the realization of land and the office building. The consideration received for the land will be: (50,000 / 200,000) × 200,000 = GHS50,000 Consideration received for the office building will be: (150,000 / 200,000) × 200,000 = GHS150,000 [6 Marks]

Cost as defined in section 36(1) of Act 896 includes the following: i. expenditure incurred in acquiring, construction, manufacturing or production of the asset; ii. expenditure incurred in altering, improving or maintain the asset; and iii. incidental expenditure incurred in acquiring and realizing the asset.

Cost of the land Acquisition cost in March 2016 was GHS25,000. The amount of GHS5,000 spent to construct a fence wall around the property and to complete title registration processes at the Lands Commission qualifies as cost. The GHS5,000 paid to the valuer also qualifies as incidental cost. The total cost will be GHS35,000. [4 Marks]

Gain from realization of land Section 35(1)(a) of Act 896 defines a gain from realization as the sum of the consideration received less the cost at the time of realization. The gain made from the realization of the land will be 50,000 – 35,000 = GHS15,000. [3 Marks]

Realization of Office Building The office building qualifies as a depreciable asset as defined in section 133. [3 Marks] Under the Third Schedule to Act 896, buildings are classified as class 4 assets. [3 Marks] Under Paragraph 4 of the Third Schedule to Act 896, the difference between the consideration received and the written down value of the asset must be included in the income of the Ravid Ghana Limited. GHS150,000 – GHS70,000 = GHS80,000. Thus, GHS80,000 must be included in the income of the company.