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  1. #1
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    Selling my 100% in a CC

    Hi Guys.

    I need some assistance with the Tax implications of selling my 100% share in a CC.

    Currently, lets say my members contribution is R100 (just an assumed figure). This amount isn't actual money I put in alone, but rather also the value of the time I spent building the CC and creating and adding to it ... time that wasn't paid by salary. I have essently created a Members Contribution as the Credit, and an Intangible Asset as a debit.

    My question is this ... I am planning to sell the my share for R100 i.e. the equivalent value of my members contribution. Now, because this is the value of what I have "invested" in the entity ... is it tax exempt ... can the other company just buy the Interest for R100 and I don't have to worry about paying tax or what?

    Regards

    Itai
    If you need any Accounting, Tax or even Financial Management advice, PM me and I'll try help and keep your information confidential.

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    Site Caretaker Dave A's Avatar
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    So essentially you capitalised unpaid salary - which means you would have paid income tax on that salary income (if applicable).

    I can't see SARS getting excited about you declaring a nil capital gain unless you did a whole bundle of such transactions.

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    Quote Originally Posted by Dave A View Post
    So essentially you capitalised unpaid salary - which means you would have paid income tax on that salary income (if applicable).

    I can't see SARS getting excited about you declaring a nil capital gain unless you did a whole bundle of such transactions.
    I didn't pay income tax on it, should I have, I can't afford the income tax on that because I never took the cash.

    I'm not making any gains on the sale of the company, I'm selling it for the value I put in ... i.e. that 300,000
    If you need any Accounting, Tax or even Financial Management advice, PM me and I'll try help and keep your information confidential.

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    Site Caretaker Dave A's Avatar
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    That changed the complexion of the question somewhat. Tough to say where to start, but this looks as good a place as any -
    Quote Originally Posted by eitai2001 View Post
    I'm not making any gains on the sale of the company, I'm selling it for the value I put in ... i.e. that 300,000
    That would be money you took out of your pocket and paid into the company or undrawn profits from the trading of the CC?

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    Quote Originally Posted by Dave A View Post
    That changed the complexion of the question somewhat. Tough to say where to start, but this looks as good a place as any -

    That would be money you took out of your pocket and paid into the company or undrawn profits from the trading of the CC?
    Well I didn't have cash to put in, so I did everything myself only withdrew a little money, and I believe R300k is the equivalent value of what I put in over 3 years.

    I think the easiest way to structure the sale will be to sell the website itself at a profit of R300k, and being an SBC I won't pay tax because profit will be <300k as I have a 20k loss on books, and then I take the profits as Dividend and pay 10% STC and it will be exempt income for me.
    If you need any Accounting, Tax or even Financial Management advice, PM me and I'll try help and keep your information confidential.

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by eitai2001 View Post
    I think the easiest way to structure the sale will be to sell the website itself at a profit of R300k, and being an SBC I won't pay tax because profit will be <300k as I have a 20k loss on books, and then I take the profits as Dividend and pay 10% STC and it will be exempt income for me.
    Sounds like a good plan.

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    So if I pay 18% on that amount (because it was 300,000 over 3 years), will sars be happy ... there is no capital appreciation on it.
    If you need any Accounting, Tax or even Financial Management advice, PM me and I'll try help and keep your information confidential.

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by eitai2001 View Post
    any idea if my CGT calc is right
    I'm hoping Sean or Christine will check that one over. It looks like you'd gone about calculating it the right way, but my knowledge on CGT is rusty.

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    I don't have the time to go to the suppliers and fill in forms ... I'm busy with honours. However, I will ensure I get a copy of every new application that they fill in and send to the suppliers signing surety ... in any case ... I think I only have credit with about 6 suppliers and the bank ... for the rest of them, they need to pay COD or fill in a new app for credit.

    I spoke to a lawyer already though, and she said the contract covers me. In terms of my assets ... I do not own anything besides a computer and a playstation and a bed :P ... the car is my mom's and I still live at home, everything else belongs to by mom's boyfriend who isn't related to me.

    To be honest, not sure why everyone gave me credit in the first place, especially the bank ... I never signed over any security ... except a life insurance thing.

    I heed and thank you for your warnings ... I'm pretty sure I've got it covered ... but I will fax each accounting department a letter of resignation as a shareholder in a CC, and perhaps a request for a letter to be released as surer to be faxed back to me.

    I will make sure I get copies of all new contracts signed by the new owner.

    Regards

    Itai
    If you need any Accounting, Tax or even Financial Management advice, PM me and I'll try help and keep your information confidential.

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    Site Caretaker Dave A's Avatar
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    You could always go into the CIPRO offices (I'm sure they're in Pretoria) and get it done on the turn, seeing as you're in JHB.

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