Question Tag: Capital Gains

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STP – Feb 2020 – L2 – Q3 – Taxation of Capital Transactions

Advise Ravid Ghana Ltd on tax implications of selling land and office building for GHS200,000.

Question

Ravid Ghana Ltd is a software development company with its registered office located at North Kaneshie in the Greater-Accra Region of Ghana. In March 2016 the company purchased a parcel of land at Oyarifa at a cost of GH¢25,000.00. The company spent GH¢5,000 to construct a fence wall around the property and to complete title registration processes at the Lands Commission. In May 2017, the company also purchased an office building at Madina valued at GH¢100,000.00 as well as a Toyota Hilux pick-up valued at GH¢100,000.00. In February 2018, the board of directors of the company decided to dispose of the parcel of land purchased in March 2016 and the office building in order to raise money to finance the purchase of strategic assets. The company engaged the services of a valuer to determine the market value of the land located at Oyarifa. The company paid the valuer GH¢5,000.00 for services rendered. In August 2019, the company sold the parcel of land and the office building in a single transaction for GH¢200,000.00. At the time of the sale, the market value of the land was GH¢50,000.00 and the office building was GH¢150,000.00. The written down value of the building was GH¢70,000.00 at the time of the sale.

Required: Advise the company on the income tax implications of the realization of the assets.

Answer

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Tags: Asset Realization, Capital Gains, Consideration Apportionment, Depreciable assets, Income Tax
Level: Level 2

Topic: Taxation of Capital Transactions
Series: FEB 2020

STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

Question

Welmount Ghana Ltd is a construction company with its registered office located at Cantoments in Accra. In February 2007 it purchased a parcel of land at Achimota at the cost of GH₵75,000. The company spent GH₵25,000 to construct a fence wall around the property and to complete title registration processes at the Lands Commission. In March 2008, the company also purchased shares in Barclays bank of Ghana for GH₵20,000. In April 2017, the board of directors of the company decided to purchase another parcel of land at Tse Addo near the Trade Fair at La. The board further resolved to sell off the parcel of land purchased in February 2007 and the shares the company held in Barclays bank to finance the purchase of the parcel of land at Tse Addo. The company engaged the services of a valuer to determine the market value of the land located at Achimota and the shares the company held in Barclays bank. The company paid the valuer GH₵30,000 for his services. A marketing firm was contracted to advertise the sale of the parcel of land and the shares and the firm submitted a bill of GH₵35,000 to the company. In June 2017, the company sold the parcel of land and the shares in a single transaction for GH₵500,000. At the time of the sale, the market value of the parcel of land was GH₵400,000 and that of the shares was GH₵100,000. The company paid GH₵40,000 to a law firm to conduct due diligence on the parcel of land the company intended to purchase. In February 2018, the Managing Director of the company signed the purchase agreement and an amount of GH₵600,000 was paid to the owners of the property.

Required:

I. Advise on the company on the income tax implications of the realization of the assets. (20 marks) II. Advise on measures the company could have adopted to mitigate its tax exposure (if any) on the realization of the assets.

Answer

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Tags: apportionment, Asset Realization, Capital Gains, Income Tax Act, Roll-Over Relief, Tax Planning
Level: Level 2

Topic: Taxation of Capital Transactions
Series: AUG 2018

STP – Feb 2021 – L2 – Q3 – Taxation of Capital Transactions

Advise Tremor Ghana Ltd on tax implications of asset disposals and tax planning opportunities.

Question

Tremor Ghana Ltd is a trading company with its registered office located at North Legon. The basis period of the company ends on $31^{\text {st }}$ December of every year. In August 2018, the company acquired the following assets.

ASSET	COST (GHc)
Computers	$50,000.00$
Motor Vehicles	$150,000.00$
Land	$350,000.00$

In November 2019, the company disposed of the assets for the following amounts:

ASSET	COST (GHc)
Computers	$70,000.00$
Motor Vehicles	$160,000.00$
Land	$450,000.00$

In January 2020, the company acquired a new office building at the cost of GHc600,000.

Required: (i) Advise the company on the income tax implications of the realization of the assets in November 2019. 20 marks (ii) Identify the tax planning opportunities the company could have employed to mitigate its tax exposure on the realization of the assets.

Answer

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Topic: Taxation of Capital Transactions
Series: FEBRUARY 2021

STP – Aug 2013 – L2 – Q4 – Taxation of Specialized Business Sectors

Advise on tax liabilities for TecAxxes Bank Ltd for 2011 and 2012.

Question

You have been recently employed as the Tax Accountant for TecAxxes Bank Ltd. You have agreed with management to consult the Bank’s Tax Advisers on the 2012 financial statements with a view to submitting the tax returns by end of August 2013. The Bank’s auditors have put together TecAxxes draft financial statement from which you have made extracts as below: TecAxxes Bank Ltd Income Statement for the year ended December 2012 and 2011

	Notes	2012 GH $\phi$	2011 GH $\phi$
Interest Income	1	1,522,000	1,834,000
Interest expense		(866,000)	(1,204,000)
Net Interest Income		656,000	630,000
Fee and Commission Income		342,000	282,000
Other Operating Income	2	69,520	59,630
Operating Income		1,067,520	971,630
Operating expenses	3	(514,200)	(482,420)
Charge for bad and doubtful debts	4	(29,000)	(41,000)
Operating Profit		524,320	448,210
Other Income	5	54,800	42,300
Profit before tax		579,120	490,510
Tax Paid	6	(202,420)	(280,520)
Transfer to Income Surplus		376,700	209,990

Notes

Interest Income includes income earned from: Loans granted fishermen Loans granted to pineapple growers
Other Operating Income Dividend income (Net) Govt. Bond Int. income (net) Bad Debts recovered
Operating Expenses includes Depreciation
Charge for Bad and doubtful debts Specific credit risk provision General Provision for credit risk
Other Income Disposal of used tires and depreciated Vehicles Profit on sale of shares
Tax paid is made up as follows: Deferred tax liability Corporate tax paid for year Total

	GH $\phi$	GH $\phi$
Loans granted fishermen	28,000	24,050
Loans granted to pineapple growers	32,000	15,000
Dividend income (Net)	20,120	17,000
Govt. Bond Int. income (net)	17,000	28,500
Bad Debts recovered	32,400	14,130
	69,520	59,630
Depreciation	80,200	65,600
Specific credit risk provision	9,010	20,600
General Provision for credit risk	19,990	20,400
	29,000	41,000
Disposal of used tires and depreciated Vehicles	39,000	17,100
Profit on sale of shares	15,800	25,200
	54,800	42,300
Deferred tax liability	102,200	121,000
Corporate tax paid for year	100,220	159,520
	202,420	280,520

Agreed capital allowance for the year is GH $62,500 (2010: GH $75,000).

Required Please, as the newly appointed Tax Accountant for TecAxxes Bank Ltd, advice the Managing Director on the tax liabilities arising from this position statement presented to you for the two years.

Answer

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Tags: Banking, Capital Gains, Financial Statements, Tax Liability
Level: Level 2

Topic: Taxation of Specialized Business Sectors
Series: AUG 2013

PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

Question

b) Kwamoso LTD sold the following assets to Mr. Badu on 18 May, 2023 for GH¢450,000 to settle a tax liability. Kwamoso LTD is not listed on the Ghana Stock Exchange.

Below are details of the assets:

Name of Asset	Cost (GH¢)	Net Book Value (GH¢)	Market Value (18 May 2023) (GH¢)	Market Value (31 Dec 2023) (GH¢)
Truck vehicle	750,000	480,000	320,000	350,000
Generator	60,000	29,400	8,400	8,000
Laptops	48,000	17,200	8,000	7,200

Required:

i) Compute the consideration received in respect of each asset realised.

ii) What constitutes capital assets in the context of capital gains tax in Ghana?

iii) Under what circumstance would there be a loss in the realization of a liability?

Answer

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Tags: Capital Gains, Market Value, Tax computation, Tax Liability, Taxable Assets
Level: Level 2

Topic: Taxation of Capital Gains
Series: Nov 2024

AT – Nov 2016 – L3 – SB – Q3 – Capital Gains Tax

Compute chargeable gains, capital gains tax, and new cost of remaining plant and machinery after a sale.

Question

since 2015. It has been a leading name in the production of a popular brand of household vegetable oil known as “Abop,” which is in high demand.

Given the fact that the company is doing very well, it secured funds from its bankers and bought additional Plant and Machinery in excess of its immediate needs on June 1, 2013, for ₦24,600,000.

The Finance Director convinced the Board to dispose of part of the plant and machinery to boost the company’s working capital. Consequently, on December 31, 2015, the company sold part of the Plant and Machinery for ₦37,925,000 and spent ₦5,125,000 as expenses incidental to the sale. The market value of the remaining Plant and Machinery was ₦15,375,000 as of December 31, 2015.

However, the issue of the tax implications of these transactions is worrisome to the Managing Director, who is visibly disturbed that the Federal Inland Revenue Service (FIRS) might come after the company.

You are required to:
a. State any FOUR Chargeable Assets. (2 Marks)
b. State any FOUR conditions for granting Roll-Over Relief. (8 Marks)
c. Compute the Chargeable Gains on the asset sold. (4 Marks)
d. Compute the Capital Gains Tax. (2 Marks)
e. Compute the new cost of the remaining asset. (4 Marks)

Answer

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Tags: Capital Gains, Chargeable assets, Roll-Over Relief, Tax implications
Level: Level 3

Topic: Capital Gains Tax (CGT)
Series: NOV 2016

ATAX – May 2021 – L3 – Q5 – Capital Gains Tax (CGT)

Computation of capital gains tax, reliefs, and tax implications on compensation and reorganization transactions.

Question

DD Nigeria Limited, a private limited liability company, was incorporated in March 2010. The company produces highly successful spring water. The Board of Directors of the company comprises a non-executive Chairman, his wife as the Managing Director, and the Chairman’s childhood friend. For the day-to-day running of the business, the Managing Director is being assisted by the Production Manager, Sales/Marketing Manager, Administrative Officer, and Accounting Officer (a diploma graduate).

The company has a track record of steady growth in profitability and market share. In a bid to cut down its cost of raw materials, particularly polythene, the Board at its recent meeting decided to acquire a polythene company in the neighborhood that is witnessing dwindling fortunes due to insufficient funds to finance its working capital. The Board has also lost confidence in the Accounting Officer as his poor knowledge in tax-related matters was brought to the fore during a recent visit to the company by officials of the Federal Inland Revenue Service.

The Managing Director has approached your firm of tax consultants to help provide professional advice on tax matters in respect of some transactions and activities that occurred in the last one year.

Records of the following transactions were made available to you:

(i) The company purchased plant and machinery at a cost of ₦5,000,000 on April 1, 2019. Plant was later disposed on September 15, 2019, for ₦3,500,000. The undisposed machinery was valued at ₦4,300,000. Incidental expenses incurred on disposal were ₦250,000.

(ii) The company sold an acre of land, which was acquired on May 22, 2018, at a cost of ₦6,750,000 for ₦12,500,000 on October 19, 2018. In the following month, the company bought another land, which was to be used for the purpose of the business, for ₦15,000,000 to replace the one sold. It was, however, subsequently disposed of for ₦18,000,000 in June 2019.

(iii) Part of the industrial building (where the production unit is located) was damaged in October 2020 during a protest by some youths in the area. The company, in November 2020, received ₦2,200,000 as compensation under a policy of insurance. The company has the intention of utilizing the fund for the acquisition of another building.

Required:

As the tax consultants to DD Nigeria Limited, draft a report to the Managing Director of the company explaining and providing computations (where necessary) on the:

a. Capital gains tax liability for the relevant tax year in respect to transaction (i). (5 Marks)
b. Relief available (if any) and tax liability due in respect to transaction (ii). (9 Marks)
c. Tax implications on the compensation under the policy of insurance received on the damaged industrial building. (2 Marks)
d. Treatment of gains arising from business reorganization in line with the provision of Section 49, Finance Act 2019, which amended Section 32, Capital Gains Tax Act Cap C1 LFN 2014. (4 Marks)

Answer

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Tags: Business Reorganization, Capital Gains, Finance Act 2019, Insurance Compensation
Level: Level 3

Topic: Capital Gains Tax (CGT)

ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

Question

Obioma and Sons Limited, a company based in Emene – Enugu, has been producing vegetable oil since 2015. It has been a leading name in the production of a popular brand of household vegetable oil known as “Abop,” which is in high demand.

Given the fact that the company is doing very well, it secured funds from its bankers and bought additional Plant and Machinery in excess of its immediate needs on June 1, 2013 for N24,600,000. The Finance Director convinced the Board to dispose part of the plant and machinery to boost the company’s working capital. Consequently, on December 31, 2015, the company sold part of the Plant and Machinery for N37,925,000 and spent N5,125,000 as expenses incidental to the sale. The market value of the remaining Plant and Machinery was N15,375,000 as at December 31, 2015.

However, the issue of the tax implications of these transactions is worrisome to the Managing Director, who is visibly disturbed that the Federal Inland Revenue Service (FIRS) might come after the company.

As the tax consultant to the company, you are required to:

a) State any FOUR Chargeable Assets. (2 Marks)
b) State any FOUR conditions for granting Roll-Over Relief. (8 Marks)
c) Compute the Chargeable Gains on the asset sold. (4 Marks)
d) Compute the Capital Gains Tax. (2 Marks)
e) Compute the new cost of the remaining asset. (4 Marks)

Answer

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Tags: Asset Disposal, Capital Gains, Chargeable assets, Plant and Machinery, Roll-Over Relief
Level: Level 3

Topic: Capital Gains Tax (CGT)

FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Question

Bettaluck plc is experiencing a substantial net cash inflow, which has been temporarily invested in a short-term equity portfolio. This portfolio consists of investments in four Nigerian listed companies. The funds are intended to meet tax obligations, dividend payments, and future capital expenditures in several months.

Portfolio Details:

Required:

a. Based on the data provided, calculate the risk (i.e., Beta) of Bettaluck’s short-term investment portfolio relative to the market. (4 Marks)

b. Recommend whether the composition of Bettaluck’s short-term investment portfolio should be adjusted. Provide reasons for your recommendation, including relevant calculations. (6 Marks)

c. Discuss the factors a financial manager should consider when investing in marketable securities. (5 Marks)

Answer

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Tags: Capital Gains, Dividend Yield, Financial management, Investment Portfolio, Market Return, Marketable Securities, Portfolio Beta, Risk Assessment, Short-Term Strategy, Treasury bills
Level: Level 3

Topic: Portfolio Management

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

Question

Microfin Garment Nigeria Plc has been in business for many years as a textile manufacturer. At a recent annual general meeting, shareholders noted a decline in profitability, market share price, and dividends. They observed a particular product line was underperforming due to competition, and a reorganization was agreed upon to be completed within quarter 3 of the new financial year.

The Board of Directors complied with the shareholders’ resolution, deciding to:

Relieve the General Manager (Mr. Chukwu Bala) and Operations Manager (Mr. Ojo Ekaite) of their jobs due to the underperforming segment. They were compensated N12 million and N7.5 million, respectively.
Redeploy production and administrative staff to other branches.

Dispose of qualifying property, plant, and equipment with details as follows:

Asset	Cost (N’000)	Tax Written Down Value (N’000)	Sales Proceeds (N’000)
Industrial building	85,000	36,125	123,900
Plant and machinery	128,500	16,062.5	80,000 and 60,000
Factory equipment	150,600	37,650	160,000

Additional Notes:

Industrial building: Acquired in 2014, with renovation costs of N288,000 and incidental expenses of N150,000 prior to disposal in February 2021. N100.2 million of the proceeds were used in July 2021 to acquire a new building for the head office.
Plant and machinery: Acquired in 2017, partially sold in April 2021 for N80 million. The undisposed part had a market value of N65.3 million and was sold in August 2021 for N60 million, with N30,000 in incidental expenses.
Factory equipment: Acquired in 2018, sold in September 2021 at a market value of N162.5 million after incurring N250,000 refurbishment costs.

Required:

As the company’s Tax Consultant, you are to submit a report to the Managing Director showing:

a. The capital gains (if any) and the capital gains tax payable on:

Disposal and subsequent acquisition of the industrial building (7 Marks)
Disposal of plant and machinery (6 Marks)
Disposal of factory equipment (3 Marks)

b. State the due dates for filing of self-assessment returns and payment of tax computed on each asset disposed of. (2 Marks)

c. Comment on the provisions of the Finance Act 2020 regarding compensation for loss of office for the two staff members disengaged by the company. (2 Marks)

(Total 20 Marks)

Answer

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Tags: Capital Gains, Factory Equipment, Finance Act 2020, Industrial Building, Plant and Machinery
Level: Level 3

Topic: Capital Gains Tax (CGT)
Series: NOV 2022

STP – Feb 2020 – L2 – Q3 – Taxation of Capital Transactions

Advise Ravid Ghana Ltd on tax implications of selling land and office building for GHS200,000.

Question

Required: Advise the company on the income tax implications of the realization of the assets.

Answer

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Tags: Asset Realization, Capital Gains, Consideration Apportionment, Depreciable assets, Income Tax
Level: Level 2

Topic: Taxation of Capital Transactions
Series: FEB 2020

STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

Question

Required:

Answer

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Tags: apportionment, Asset Realization, Capital Gains, Income Tax Act, Roll-Over Relief, Tax Planning
Level: Level 2

Topic: Taxation of Capital Transactions
Series: AUG 2018

STP – Feb 2021 – L2 – Q3 – Taxation of Capital Transactions

Advise Tremor Ghana Ltd on tax implications of asset disposals and tax planning opportunities.

Question

ASSET	COST (GHc)
Computers	$50,000.00$
Motor Vehicles	$150,000.00$
Land	$350,000.00$

In November 2019, the company disposed of the assets for the following amounts:

ASSET	COST (GHc)
Computers	$70,000.00$
Motor Vehicles	$160,000.00$
Land	$450,000.00$

In January 2020, the company acquired a new office building at the cost of GHc600,000.

Answer

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Topic: Taxation of Capital Transactions
Series: FEBRUARY 2021

STP – Aug 2013 – L2 – Q4 – Taxation of Specialized Business Sectors

Advise on tax liabilities for TecAxxes Bank Ltd for 2011 and 2012.

Question

	Notes	2012 GH $\phi$	2011 GH $\phi$
Interest Income	1	1,522,000	1,834,000
Interest expense		(866,000)	(1,204,000)
Net Interest Income		656,000	630,000
Fee and Commission Income		342,000	282,000
Other Operating Income	2	69,520	59,630
Operating Income		1,067,520	971,630
Operating expenses	3	(514,200)	(482,420)
Charge for bad and doubtful debts	4	(29,000)	(41,000)
Operating Profit		524,320	448,210
Other Income	5	54,800	42,300
Profit before tax		579,120	490,510
Tax Paid	6	(202,420)	(280,520)
Transfer to Income Surplus		376,700	209,990

Notes

Interest Income includes income earned from: Loans granted fishermen Loans granted to pineapple growers
Other Operating Income Dividend income (Net) Govt. Bond Int. income (net) Bad Debts recovered
Operating Expenses includes Depreciation
Charge for Bad and doubtful debts Specific credit risk provision General Provision for credit risk
Other Income Disposal of used tires and depreciated Vehicles Profit on sale of shares
Tax paid is made up as follows: Deferred tax liability Corporate tax paid for year Total

	GH $\phi$	GH $\phi$
Loans granted fishermen	28,000	24,050
Loans granted to pineapple growers	32,000	15,000
Dividend income (Net)	20,120	17,000
Govt. Bond Int. income (net)	17,000	28,500
Bad Debts recovered	32,400	14,130
	69,520	59,630
Depreciation	80,200	65,600
Specific credit risk provision	9,010	20,600
General Provision for credit risk	19,990	20,400
	29,000	41,000
Disposal of used tires and depreciated Vehicles	39,000	17,100
Profit on sale of shares	15,800	25,200
	54,800	42,300
Deferred tax liability	102,200	121,000
Corporate tax paid for year	100,220	159,520
	202,420	280,520

Agreed capital allowance for the year is GH $62,500 (2010: GH $75,000).

Answer

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Tags: Banking, Capital Gains, Financial Statements, Tax Liability
Level: Level 2

Topic: Taxation of Specialized Business Sectors
Series: AUG 2013

PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

Question

b) Kwamoso LTD sold the following assets to Mr. Badu on 18 May, 2023 for GH¢450,000 to settle a tax liability. Kwamoso LTD is not listed on the Ghana Stock Exchange.

Below are details of the assets:

Name of Asset	Cost (GH¢)	Net Book Value (GH¢)	Market Value (18 May 2023) (GH¢)	Market Value (31 Dec 2023) (GH¢)
Truck vehicle	750,000	480,000	320,000	350,000
Generator	60,000	29,400	8,400	8,000
Laptops	48,000	17,200	8,000	7,200

Required:

i) Compute the consideration received in respect of each asset realised.

ii) What constitutes capital assets in the context of capital gains tax in Ghana?

iii) Under what circumstance would there be a loss in the realization of a liability?

Answer

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Tags: Capital Gains, Market Value, Tax computation, Tax Liability, Taxable Assets
Level: Level 2

Topic: Taxation of Capital Gains
Series: Nov 2024

AT – Nov 2016 – L3 – SB – Q3 – Capital Gains Tax

Compute chargeable gains, capital gains tax, and new cost of remaining plant and machinery after a sale.

Question

since 2015. It has been a leading name in the production of a popular brand of household vegetable oil known as “Abop,” which is in high demand.

Given the fact that the company is doing very well, it secured funds from its bankers and bought additional Plant and Machinery in excess of its immediate needs on June 1, 2013, for ₦24,600,000.

Answer

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Tags: Capital Gains, Chargeable assets, Roll-Over Relief, Tax implications
Level: Level 3

Topic: Capital Gains Tax (CGT)
Series: NOV 2016

ATAX – May 2021 – L3 – Q5 – Capital Gains Tax (CGT)

Computation of capital gains tax, reliefs, and tax implications on compensation and reorganization transactions.

Question

The Managing Director has approached your firm of tax consultants to help provide professional advice on tax matters in respect of some transactions and activities that occurred in the last one year.

Records of the following transactions were made available to you:

Required:

As the tax consultants to DD Nigeria Limited, draft a report to the Managing Director of the company explaining and providing computations (where necessary) on the:

Answer

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Tags: Business Reorganization, Capital Gains, Finance Act 2019, Insurance Compensation
Level: Level 3

Topic: Capital Gains Tax (CGT)

ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

Question

As the tax consultant to the company, you are required to:

Answer

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Tags: Asset Disposal, Capital Gains, Chargeable assets, Plant and Machinery, Roll-Over Relief
Level: Level 3

Topic: Capital Gains Tax (CGT)

FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Question

Portfolio Details:

Required:

a. Based on the data provided, calculate the risk (i.e., Beta) of Bettaluck’s short-term investment portfolio relative to the market. (4 Marks)

b. Recommend whether the composition of Bettaluck’s short-term investment portfolio should be adjusted. Provide reasons for your recommendation, including relevant calculations. (6 Marks)

c. Discuss the factors a financial manager should consider when investing in marketable securities. (5 Marks)

Answer

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Tags: Capital Gains, Dividend Yield, Financial management, Investment Portfolio, Market Return, Marketable Securities, Portfolio Beta, Risk Assessment, Short-Term Strategy, Treasury bills
Level: Level 3

Topic: Portfolio Management

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

Question

The Board of Directors complied with the shareholders’ resolution, deciding to:

Relieve the General Manager (Mr. Chukwu Bala) and Operations Manager (Mr. Ojo Ekaite) of their jobs due to the underperforming segment. They were compensated N12 million and N7.5 million, respectively.
Redeploy production and administrative staff to other branches.

Dispose of qualifying property, plant, and equipment with details as follows:

Asset	Cost (N’000)	Tax Written Down Value (N’000)	Sales Proceeds (N’000)
Industrial building	85,000	36,125	123,900
Plant and machinery	128,500	16,062.5	80,000 and 60,000
Factory equipment	150,600	37,650	160,000

Additional Notes:

Industrial building: Acquired in 2014, with renovation costs of N288,000 and incidental expenses of N150,000 prior to disposal in February 2021. N100.2 million of the proceeds were used in July 2021 to acquire a new building for the head office.
Plant and machinery: Acquired in 2017, partially sold in April 2021 for N80 million. The undisposed part had a market value of N65.3 million and was sold in August 2021 for N60 million, with N30,000 in incidental expenses.
Factory equipment: Acquired in 2018, sold in September 2021 at a market value of N162.5 million after incurring N250,000 refurbishment costs.

Required:

As the company’s Tax Consultant, you are to submit a report to the Managing Director showing:

a. The capital gains (if any) and the capital gains tax payable on:

Disposal and subsequent acquisition of the industrial building (7 Marks)
Disposal of plant and machinery (6 Marks)
Disposal of factory equipment (3 Marks)

b. State the due dates for filing of self-assessment returns and payment of tax computed on each asset disposed of. (2 Marks)

c. Comment on the provisions of the Finance Act 2020 regarding compensation for loss of office for the two staff members disengaged by the company. (2 Marks)

(Total 20 Marks)

Answer

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Tags: Capital Gains, Factory Equipment, Finance Act 2020, Industrial Building, Plant and Machinery
Level: Level 3

Topic: Capital Gains Tax (CGT)
Series: NOV 2022

Question Tag: Capital Gains

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STP – Feb 2020 – L2 – Q3 – Taxation of Capital Transactions

Advise Ravid Ghana Ltd on tax implications of selling land and office building for GHS200,000.

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STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

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STP – Feb 2021 – L2 – Q3 – Taxation of Capital Transactions

Advise Tremor Ghana Ltd on tax implications of asset disposals and tax planning opportunities.

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STP – Aug 2013 – L2 – Q4 – Taxation of Specialized Business Sectors

Advise on tax liabilities for TecAxxes Bank Ltd for 2011 and 2012.

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PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

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AT – Nov 2016 – L3 – SB – Q3 – Capital Gains Tax

Compute chargeable gains, capital gains tax, and new cost of remaining plant and machinery after a sale.

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ATAX – May 2021 – L3 – Q5 – Capital Gains Tax (CGT)

Computation of capital gains tax, reliefs, and tax implications on compensation and reorganization transactions.

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ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

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FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Required:

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AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

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STP – Feb 2020 – L2 – Q3 – Taxation of Capital Transactions

Advise Ravid Ghana Ltd on tax implications of selling land and office building for GHS200,000.

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STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

You're reporting an error for "STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions"

STP – Feb 2021 – L2 – Q3 – Taxation of Capital Transactions

Advise Tremor Ghana Ltd on tax implications of asset disposals and tax planning opportunities.

You're reporting an error for "STP – Feb 2021 – L2 – Q3 – Taxation of Capital Transactions"

STP – Aug 2013 – L2 – Q4 – Taxation of Specialized Business Sectors

Advise on tax liabilities for TecAxxes Bank Ltd for 2011 and 2012.

You're reporting an error for "STP – Aug 2013 – L2 – Q4 – Taxation of Specialized Business Sectors"

PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

You're reporting an error for "PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization"

AT – Nov 2016 – L3 – SB – Q3 – Capital Gains Tax

Compute chargeable gains, capital gains tax, and new cost of remaining plant and machinery after a sale.

You're reporting an error for "AT – Nov 2016 – L3 – SB – Q3 – Capital Gains Tax"

ATAX – May 2021 – L3 – Q5 – Capital Gains Tax (CGT)

Computation of capital gains tax, reliefs, and tax implications on compensation and reorganization transactions.

You're reporting an error for "ATAX – May 2021 – L3 – Q5 – Capital Gains Tax (CGT)"

ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)

Computes chargeable gains, capital gains tax, and implications of disposing part of a company’s assets.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q3 – Capital Gains Tax (CGT)"

FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Required:

You're reporting an error for "FM – Nov 2021 – L3 – Q6 – Portfolio Management"

AT – Nov 2022 – L3 – Q3 – Capital Gains Tax

Calculate capital gains and tax payable on asset disposals, analyze due dates for tax return and payment, and evaluate provisions for compensation.

You're reporting an error for "AT – Nov 2022 – L3 – Q3 – Capital Gains Tax"

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