Skip to content

CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Managerial Decisions

A company claimed full exemption under the shifting-of-industrial-undertaking provision because its new asset cost was equal to or more than the capital gain. It then sells the new asset within three years of acquiring it. For computing capital gain on that sale, what is the cost of the new asset?

The cost is nil. When full exemption was granted because the new asset cost was equal to or more than the gain, a transfer of that new asset within three years is computed with nil cost, so the earlier exempted gain is effectively taxed.

  1. AIts actual purchase cost
  2. BNilCorrect
  3. CThe capital gain originally exempted, added to its actual cost
  4. DIts actual cost reduced by half

Explanation

Where the new asset cost equals or exceeds the capital gain, the cost of the new asset for a transfer within three years is taken as nil. Actual cost would allow a double benefit.

Did you get it right without looking?

One question tells you little. A timed set on Tax Planning and Managerial Decisions shows your real accuracy, how long you take and where you lose marks.

Practise Tax Planning and Managerial DecisionsFree diagnostic mock

More Tax Planning and Managerial Decisions questions