- 10 Marks
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
i) Computation of Consideration Received in respect of each asset:
Consideration Received = (Market Value of Asset ÷ Total Market Value of all Assets) × Total Consideration Received
| Name of Asset | Market Value (GH¢) | Calculation | Consideration Received (GH¢) |
|---|---|---|---|
| Truck vehicle | 320,000 | (320,000 / 336,400) × 450,000 | 428,061.83 |
| Generator | 8,400 | (8,400 / 336,400) × 450,000 | 11,236.62 |
| Laptops | 8,000 | (8,000 / 336,400) × 450,000 | 10,701.55 |
ii) Definition of Capital Assets:
Capital assets are assets other than trading stock or depreciable assets that are employed in a business or investment.
iii) Circumstance for Loss in the Realization of a Liability:
A loss occurs on the realization of a liability when the sum of consideration offered for the liability is more than the amount outstanding at the time of realization.
- Tags: Capital Gains, Market Value, Tax computation, Tax Liability, Taxable Assets
- Level: Level 2
- Topic: Taxation of Capital Gains
- Series: Nov 2024
- Uploader: Salamat Hamid