Question Tag: Capital gains tax

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  • 5 Marks

PT – May 2021 – L2 – Q5b – Taxation of Capital Gains

Explain the taxation rules for asset transfers to a spouse or former spouse during a divorce settlement or upon death.

On the death or as part of a divorce settlement or bona fide separation agreement, an individual may transfer an asset to a spouse or former spouse.

Required:
What are the taxation rules on this arrangement?

  • When an individual transfers an asset to a spouse or former spouse during a divorce settlement, separation agreement, or upon death, the transfer is treated as follows:
    1. No capital gain or loss is realized by the individual making the transfer.
    2. The individual is treated as if they derived an amount equal to the net cost of the asset immediately before the realization.
    3. The spouse or former spouse who receives the asset is treated as having incurred an expenditure equal to the net cost of acquiring the asset.
  • As a result, the transaction does not trigger capital gains tax for the individual making the transfer. The net cost refers to:
    1. For a depreciable asset, the written down value of the pool it belongs to, apportioned according to the asset’s market value.
    2. For other assets, the net cost is the cumulative cost less any cumulative consideration received for the asset.
      (5 marks)
  • 5 Marks

PT – Dec 2023 – L2 – Q5c – Taxation of Capital Gains

Calculation of capital gain on the realization of shares and the tax payable.

Yaa Baby acquired shares in Adom Ltd as follows:

Date Transaction No. of shares Share price Value (GH¢)
01/02/19 Bought 1,000 shares 1,000 2.00 2,000
01/03/19 Bought 1,500 shares 1,500 2.50 3,750
01/06/20 Bought 2,000 shares 2,000 3.00 6,000
01/04/21 Bought 1,750 shares 1,750 4.00 7,000
01/12/21 Received rights issue (1 share for every 10 shares) 625 1.50 937.50
31/12/21 Sold 3,800 shares 6.00 22,800

Required:
Compute the capital gain on the realization and the tax payable. (5 marks)

Computation of capital gains tax 25% x GH¢11,918.18 = GH¢1,787.73

  • 5 Marks

PT – Nov 2021 – L2 – Q5c – Taxation of Capital Gains

Compute the appropriate tax for gifts received by Flowqueen for the 2020 year of assessment.

Flowqueen, a sole proprietor of Freddy Ent, was adjudged the best distributor of Mino Ltd for the year 2020 and received the following gifts:

  • 70 Inches Samsung LED valued at GH¢50,000 from Freddy Ltd.
  • Toyota saloon car worth GH¢80,000 from the clients of Freddy Ltd.

Her income from the business for the 2020 year of assessment amounted to GH¢120,000.

Required:
Compute the appropriate tax or taxes of Flowqueen for the 2020 year of assessment.

Computation of Tax for Flowqueen

Step 1: Gift Tax Calculation

The total value of gifts received by Flowqueen in 2020 is:

Alternatively, if the gifts are treated as part of Flowqueen’s income, her total taxable income becomes GH¢250,000 (GH¢120,000 + GH¢130,000), and the relevant taxes would apply to the entire amount.

  • 5 Marks

PT – Nov 2021 – L2 – Q5b – Taxation of Capital Gains

Calculate the capital gains tax on the sale of shares by Maame Adwoa Konadu Yiadom.

Maame Adwoa Konadu Yiadom is a shareholder of Asokwa Company Ltd, a company not listed on the Ghana Stock Exchange Market. Maame Adwoa Konadu Yiadom transacted the following business with Asokwa Company Ltd:

  • 1 January 2010 purchased 100,000 ordinary shares for GH¢50,000.
  • 30 June 2015 purchased 100,000 ordinary shares at a price of GH¢0.60 per share.
  • 1 January 2020 Maame Adwoa Konadu Yiadom accepted a rights offer of 1 share for every 10 shares held as at 31 December 2019 at a price of GH¢0.50 per share.
  • 31 December 2020 Maame Adwoa Konadu Yiadom sold 50,000 shares for GH¢60,000, paying a commission of 2% of the sale value to the brokerage firm that facilitated the sale. The current market price per share on the market is GH¢1.12 per share.

Required:
Calculate the capital gain tax, if any.

Computation of Cost of Shares:

  • 4 Marks

AT – Nov 2015 – L3 – Q1b – Business income – Corporate income tax

Circumstances under which shares are not considered chargeable assets for capital gains tax purposes.

Shares of a resident company are classified as chargeable assets under capital gains tax. Under what circumstances will shares not be described as chargeable assets under capital gains tax provision?

Shares are classified as chargeable assets under section 97 (1) (a) and (b). However, under the following provisions, shares are not classified as chargeable assets:

i. Securities (shares) of a company listed on the Ghana Stock Exchange during the twenty-five years after the establishment of the Ghana Stock Exchange. It was established in 1990. Section 97 (3) (a) of the Internal Revenue Act, 2000 Act 592.

ii. Also, realization involving the disposal of shares in the course of liquidation (section 96 (2) of the Internal Revenue Act 2000, Act 592, as amended).

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