Question

1. Distinguish between capital gains and investment income.

2 During the 2016 year of assessment Alonzo made a capital gain on the sale of his holiday house of R100 000. He suffered a capital loss on the sale of certain dividend yielding shares of R10 000. You are required to determine his aggregate capital gain for the 2018 year of assessment.

3 Costa purchased shares in 2014 from Chelsea limited for R80 000. These shares were purchased as a long-term investment for Costa. The markets have improved over the years and he decides to sell his shares for R240 000 in 2018. You are required to calculate the Capital Gain Tax on this transaction.

Answer 1

1.

Determine the difference between capital gains and investment income as follows:

Capital Gains	Investment income
It is the incremental increase in the value of an asset from the date of purchase to the date of sale.	It is the income earned by investing in the financial and capital sector as an additional income
It is not recognised until the asset is sold	It is earned on the basis of risk level taken by the investor. Higher the risk higher be the investment return.
These can be both short term and long term	There tenure depends on the investor whether he wants a long term investment or short term investment.
It is the profit earned on asset sold	It is the profit earned by dividends, capital gains.
It can be referred to as investment income if property is purchased for investment purposes.	It can't be termed as capital gains.