ATAX – May 2017 – L3 – Q3b – Capital Gains Tax (CGT)

List allowable deductions under the Capital Gains Tax Act for chargeable gains computations.

Question

Capital Gains Tax is imposed on gains arising from the ownership of a capital asset changing hands, either by exchange, transfer, sale, or gift.

The tax is chargeable on the total amount of the chargeable gains arising after deducting allowable expenses on the disposal of chargeable assets in any year of assessment.

Required:
State the allowable deductions under the Capital Gains Tax Act CAP C1 LFN 2004 as amended. (4 Marks)

Answer

The following are the allowable deductions under the Capital Gains Tax Act CAP C1 LFN 2004 (as amended):

Cost of Acquisition:
The original purchase price or cost incurred in acquiring the asset.
Expenditure on Asset Enhancement:
Expenses incurred for improving the asset’s value or preparing it for sale.
Incidental Costs of Disposal:
Costs directly related to the disposal of the asset, such as legal fees, advertising, and valuation costs.
Cost of Establishing Ownership:
Expenses incurred to prove or defend ownership or title to the asset, including professional fees.

Tags: Allowable Deductions, Asset Disposal, Capital gains tax
Level: Level 3

Topic: Capital Gains Tax (CGT)

Uploader: Kofi