BEL3A01/TAX03A3/ADIA002/ S3PACQ3

TAXATION 3A/TAXATION (2018)

Learning Guide: Capital Gains Tax (CGT)
CONTENTS PAGE
1. Background information 1
2. Objectives 2
3. Teaching and Learning model 3
4. Resources 5
5. Question bank 6
6. Extracts of the Act 7

1. BACKGROUND INFORMATION
This module deals with Capital Gains Tax (hereafter “CGT”). CGT was introduced on 1 October
2001 (valuation date) and applies to all disposals of capital assets that took place on or after the
valuation date. CGT forms part of the tax framework and has to be included in the taxable income
of a taxpayer for the purposes of calculating normal tax of a taxpayer in accordance with section
26A of the Income Tax Act. Therefore, CGT is not a separate tax.
In Taxation 2A you should have done the basics of CGT. You should therefore be able to
calculate basic taxable capital gain and/or assessed capital loss. The calculation capital gain or
loss on disposal of assets held when capital gains tax was introduced leads to complex
calculations for both base cost and proceeds, especially when integrated with capital allowances
and VAT. In Taxation 3A (first semester for ADIA002/S3PACQ3) you will deal with these
complexities.
The taxable income must include a taxable capital gain (the assessed capital loss is carried over to
the following year of assessment) which must be determined in terms of the Eighth Schedule.
Residents are taxed on disposal of their worldwide assets whereas non-residents will be subject to
CGT on disposal of (1) immovable property situates in South Africa, (2) any interest or right in
immovable property situated in South Africa or (3) assets effectively connected with a South
African permanent establishment of a non-resident.

There are four building blocks for CGT, namely:

 Asset;
  Disposal;
 Proceeds; and
 Base Cost

The capital gain or loss is calculated as follows:

Proceeds less base cost. Where proceeds are greater than the base cost, there will be a capital
gain, and where the proceeds are less than the base cost there will be a capital loss.

The taxable capital gain or assessed capital loss shall be calculated as follows:

Step 1: Determine whether CGT needs to be calculated for individual disposal of assets (4
building blocks)
Step 2: Calculate and add all capital gains + capital losses, take applicable exclusions into
account
Step 3: Less/plus: annual exclusion (natural persons ONLY!)
Step 4: = Aggregate capital gain or aggregate capital loss
Step 5: Less: Assessed capital loss from previous year

Step 6: = Net capital gain or assessed capital loss

Step 7: If net capital gain, then multiply by: inclusion rate

If net capital loss, carry it forward to the following year.
Step 8: = Taxable capital gain that must be added to other taxable income to calculate total
taxable income.

Refer to the calculation decision tree (paragraph 21.3.4 – Haupt, Notes on South African Income
Tax)
Please note that for the purposes of this module, the focus will be on the CGT provisions relating
to companies as CGT provisions that relate to natural persons (or individuals) will be covered in
Taxation 3B (second semester for ADIA002 and S3PACQ3)

2. OBJECTIVES
After studying this module you should:
1.Be able to calculate capital gains and losses on the disposal of assets.
2.Be able to calculate capital gains and losses on disposal of assets held when capital
gains tax was introduced (pre-valuation date assets).
3.Know when to defer capital gains and be able to calculate the deferred capital gain
when included.
4.Be able to integrate VAT with capital gains calculations.

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3. TEACHING AND LEARNING MODULE

Pre reading
Purpose: to empower you with prior knowledge that should be in place before you
attend class. Work covered in Taxation 2A is assumed knowledge and is examinable.
o Communicated on ulink before a lecture
Attend lecture
Purpose: the principles of each topic are explained in a formal and structured manner
by your lecturers. The slides will be available on uLink before the lecture. It is always
advisable to bring along the slides, whether in electronic form or print form in order
to make additional notes. The lecturer reserves the right not to release all solutions
with the slides, so you will be required to complete some of the examples in class.
o Building blocks of CGT will be explained in detail
o Calculation of proceeds and base cost of assets will also be explained in detail.
o The rollovers will be explained in detail.
o Integration of CGT with allowances and VAT

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 Self study
Purpose: you need to make the work your own, and spend time in order to understand
the principles. You are expected to spend approximately 11.42 notional input hours
(excluding attending lectures) per week effectively studying tax. Please note that due
to the complexity of this unit, not much content will be covered in lectures so that you
have time to study the work covered in lectures on your own before the next lecture.
Please try by all means to be up to date with the work already done in lectures.
o Study the building blocks of CGT. You must know the definition of an “asset”
(including specific inclusions and exclusions). You are also expected to know
what a “disposal” is (including specific inclusions) and the timing of
disposals.
o Study the rules regarding the calculation of proceeds. This requires an
understanding of how to determine the proceeds on disposal of assets. You
must also know how to determine the base cost of an asset for assets acquired
before and after the valuation date.
o Study and understand the rules relating to rollover relief provided where a
taxpayer has elected to defer the capital gains in terms of paragraphs 65 and
66 of the Income Tax Act.
o Study the calculation of capital gains and losses with capital allowances (and
connected recoupments) and VAT.

Consultation
Purpose: discuss your understanding of the topic with peers and with your lecturers
and resolve uncertainties.
o Please direct your queries to your lecturer after you have studied and gained
an understanding of your own.
o Please direct your queries to your lecturer regarding questions that you have
attempted and don’t understand the answer.
o When you come for consultations, do not expect the lecturer to re-lecture the
topic.
CONSULTATION TIMES

Lecturer Mr. Siphamandla Makhaya

Office C-Ring 730
Telephone (011) 559 3451
Email [email protected]
Consulting hours Tuesdays: 12h00 – 13h30
Thursdays: 12h00 – 14h30

Objective test

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 Purpose: brief test based in basic principles to enable you to self-evaluate your basic
understanding of the topic.
o The objective test will either be uploaded on uLink after the lecture OR will
be done at the start of the following lecture. You are encouraged to do the
objective test before the next topic.

4. RESOURCES
It is very important that you study the tax principles from the textbook before
attempting to do any prescribed questions. If you study by just doing questions you
run a risk of failing this module or not getting you potential grade.

Haupt P. (2018). Notes on South African Income Tax:

The following paragraphs of the textbook are prescribed for this module:

All provisions relating specifically to individuals, trusts and farmers will be covered
in Taxation 3B for BEL3B01 (Second semester of ADIA002 and S3PACQ3).

Textbook Description Reference to the

Paragraph/ Act*
Section
CHAPTER 21 CAPITAL GAINS TAX (CGT)
21.1 Introduction Section 26A,
Eighth Schedule
21.2 Persons liable for CGT Para 2
21.3 Basic Framework of CGT
Please exclude provisions that specifically relate
to individuals. These will be covered in Taxation
3B (second semester of ADIA002 and S3PACQ3)

Excluded: section 21.3.2

21.4 Rates of CGT
Only relevant inclusion rates are for companies
and for small business corporations (these must be
studied). You need to have awareness of inclusion
rates for individuals. All other inclusion rates may
be ignored.
21.5 Capital gain Para 3
21.6 Capital loss Para 4
21.8 Asset Para 1
Exclude the section referring to “Bitcoin”
21.9 Disposal Para 11
- Excluding para 11(2) items not regarded
as disposal

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 - Exclude disposal by a trust
21.12 Proceeds Para 35
Only study 12.12.1 and 12.12.2
21.13 Base cost of an asset Para 20
Para 21
- Exclude the section dealing with Para 25
government grants (in terms of s12P) Para 26
- Exclude 21.13.4 Farming development Para 27
expenditure (to be covered in Taxation 3B) Para 29
- Exclude 21.13.6 Donations (to be covered Para 30
in Taxation 3B)
- Exclude 21.13.8 Assets acquired before
becoming resident in South Africa
- Exclude 21.13.9 Offshore trust of a non-
resident
- Exclude 21.13.19 Valuation date of an
instrument
- Exclude 21.13.21 Market value on 1
October 2001
- Exclude 21.13.23 Base cost of identical
assets
- Exclude 21.13.24 The weighted average
consistency rule
- Exclude 21.13.25 debt substitution
21.19 Roll-over relief Para 65
Only study 21.19.1 and 21.19.2 Para 66
(*) Note that any reference to para in this table below refers to the paragraph of the
Eighth Schedule of the Income Tax Act.

5. QUESTION BANK
Mitchell, L.D.; Nieuwoudt M.J.; Stark K. (2018). Tax Workbook.
Questions should be attempted, not only audited!!! Attempt the following examples and
questions:

Examples Questions
 Example 19.5  Question 19.1
 Example 19.6

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6. Extracts from the Act
26A.   Inclusion of taxable capital gain in taxable income.—There shall be included in the taxable income of a person for a year
of assessment the taxable capital gain of that person for that year of assessment, as determined in terms of the Eighth Schedule.

Eighth Schedule
20.   Base cost of asset.—(1)  Despite section 23 (b) and (f), but subject to paragraphs 24, 25 and 32 and
subparagraphs (2) and (3), the base cost of an asset acquired by a person is the sum of—
(a) the expenditure actually incurred in respect of the cost of acquisition or creation of that asset;
(b) the expenditure actually incurred in respect of the valuation of the asset for the purpose of determining a
capital gain or capital loss in respect of the asset;
(c) the following amounts actually incurred as expenditure directly related to the acquisition or disposal of that
asset namely—
(i) the remuneration of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal
advisor, for services rendered;
(ii) transfer costs;
(iii) stamp duty, transfer duty or similar duty;
(iv) advertising costs to find a seller or to find a buyer;
(v) the cost of moving that asset from one location to another;
(vi) the cost of installation of that asset, including the cost of foundations and supporting structures;
(vii) despite section 23 (d), in the case of a disposal of an asset by a person by way of a donation as
contemplated in paragraph 38, so much of any donations tax payable by that person in respect of that
donation, as determined in accordance with paragraph 22;
(viii) despite section 23 (d), if that person acquired that asset by way of a donation and the donations tax
levied in respect of that donation was paid by that person, so much of the donations tax which bears to
the full amount of the donations tax so payable the same ratio as the capital gain of the donor
determined in respect of that donation, bears to the market value of that asset on the date of that
donation; and
(ix) if that asset was acquired or disposed of by the exercise of an option (other than the exercise of an option
contemplated in item (f)), the expenditure actually incurred in respect of the acquisition of the option;
(d) the expenditure actually incurred for purposes of establishing, maintaining or defending a legal title to or
right in that asset;
(e) the expenditure actually incurred in effecting an improvement to or enhancement of the value of that asset, if
that improvement or enhancement is still reflected in the state or nature of that asset at the time of its
disposal;
(f) if that asset was acquired or disposed of by the exercise on or after valuation date of an option acquired prior
to the valuation date, the valuation date value of that option, which value must be treated as expenditure
actually incurred in respect of that asset on valuation date for the purposes of this Part;
(g) the following expenditure actually incurred which is directly related to the cost of ownership of that asset,
which is used wholly and exclusively for business purposes or which constitutes a share listed on a
recognised exchange or a participatory interest in a portfolio of a collective investment scheme—
(i) the cost of maintaining, repairing, protecting or insuring that asset;
(ii) where the asset is immovable property, rates or taxes on that property; and
(iii) interest as contemplated in section 24J on money borrowed to finance directly the expenditure
contemplated in items (a) or (e) in respect of that asset (including money borrowed to refinance those
borrowings): Provided that if that asset constitutes a share listed on a recognised exchange or a
participatory interest in a portfolio of a collective investment scheme, the expenditure contemplated in
subitems (i) to (iii) in respect of that asset must for the purposes of this item be reduced by two-thirds;
(2)  The expenditure incurred by a person in respect of an asset does not include any of the following amounts—
(a) borrowing costs, including any interest as contemplated in section 24J or raising fees;
(b) expenditure on repairs, maintenance, protection, insurance, rates and taxes, or similar expenditure; and
(c) the valuation date value of any option or right to acquire any marketable security contemplated in section
8A (1), other than borrowing costs and expenditure contemplated in subparagraph (1) (g).
(3)  The expenditure contemplated in subparagraph (1) (a) to (g), incurred by a person in respect of an asset must
be reduced by any amount which—
(a) is or was allowable or is deemed to have been allowed as a deduction in determining the taxable income of
that person before the inclusion of any taxable capital gain; or
(b) has for any reason been reduced or recovered or become recoverable from or has been paid by any other
person (whether prior to or after the incurral of the expense to which it relates), to the extent which such
amount is not taken into account as a recoupment in terms of section 8  (4) (a) or paragraph (j) of the
definition of “gross income” of an amount contemplated in item (a); or
(c) is exempt from tax in terms of section 10 (1) (y) or (yA) and is granted or paid for purposes of the acquisition
of that asset

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 Provided that the provisions of items (b) and (c) shall not apply in respect of a government grant or government
scrapping payment that is provided in respect of programmes or schemes that the Minister has identified by notice
in the Gazette for purposes of this subparagraph.

25.   Determination of base cost of pre-valuation date assets. (1)  The base cost of a pre-valuation date asset
(other than an identical asset in respect of which paragraph 32 (3A) has been applied), is the sum of the valuation date
value of that asset, as determined in terms of paragraph 26, 27 or 28 and the expenditure allowable in terms of
paragraph 20 incurred on or after the valuation date in respect of that asset.
(2)  If a person has determined the base cost as contemplated in subparagraph (1) of a pre-valuation date asset
which was disposed of during any prior year of assessment and in the current year of assessment—(a) any
amount of proceeds is received or accrued in respect of that disposal which has not been taken into account in any prior
year in determining the capital gain or capital loss in respect of that disposal;
(b) any amount of proceeds which was taken into account in determining the capital gain or capital loss in
respect of that disposal has become irrecoverable, or has become repayable or that person is no longer
entitled to those proceeds as a result of the cancellation, termination or variation of any agreement or due to
the prescription or waiver of a claim or a release from an obligation or any other event during the current
year;
(c) any amount of expenditure is incurred which forms part of the base cost of that asset which has not been
taken into account in any prior year in determining the capital gain or loss in respect of that disposal; or
(d) any amount of base cost of that asset that has been taken into account in any prior year in determining the
capital gain or capital loss in respect of that disposal, has been recovered or recouped, that person must
redetermine the base cost of that asset in terms of subparagraph (1) and the capital gain or capital loss from
the disposal of that asset, having regard to the full amount of the proceeds and base cost so redetermined.
(3)  The amount of capital gain or capital loss redetermined in the current year of assessment in terms of
subparagraph (2), must be taken into account in determining any capital gain or cap ital loss from that disposal in that
current year, as contemplated in paragraph 3 (b) (iii) or 4 (b) (iii).

26.   Valuation date value where proceeds exceed expenditure or where expenditure in respect of an asset
cannot be determined.—(1)  Where the proceeds from the disposal of a pre-valuation date asset (other than an asset
contemplated in paragraph 28 or in respect of which paragraph 32 (3A) has been applied) exceed the expenditure
allowable in terms of paragraph 20 incurred before, on and after the valuation date in respect of that asset, the person
who disposed of that asset must, subject to subparagraph (3), adopt any of the following as the valuation date value of
that asset—
(a) the market value of the asset on the valuation date as contemplated in paragraph 29;
(b) 20 per cent of the proceeds from disposal of the asset, after deducting from those proceeds an amount equal
to the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date; or
(c) the time-apportionment base cost of the asset as contemplated in paragraph 30.
(2)  Where the expenditure incurred before valuation date in respect of a pre-valuation date asset cannot be
determined by the person who disposed of that asset or the Commissioner, that person must adopt any of the following
as the valuation date value of that asset—
(a) the market value of the asset on the valuation date as contemplated in paragraph 29; or
(b) 20 per cent of the proceeds from disposal of the asset, after deducting from those proceeds an amount equal
to the expenditure allowable in terms of paragraph 20 incurred on or after the valuation date.
(3)  Where a person has adopted the market value as the valuation date value of an asset, as contemplated in
subparagraph (1) (a), and the proceeds from the disposal of that asset do not exceed that market value, that person must
substitute as the valuation date value of that asset, those proceeds less the expenditure allowable in terms of paragraph
20 incurred on or after the valuation date in respect of that asset.

27.   Valuation date value where proceeds do not exceed expenditure.—(1)  Subject to subparagraph (2),
where the proceeds from the disposal of a pre-valuation date asset do not exceed the expenditure allowable in terms of
paragraph 20 incurred before, on and after the valuation date in respect of that asset, the valuation date value of that
asset must be determined in terms of this paragraph.
(2)  This paragraph does not apply in respect of any asset contemplated in paragraph 28 or in respect of which
paragraph 32 (3A) has been applied.
(3)  Where a person has determined the market value of an asset on the valuation date, as contemplated in
paragraph 29, or the market value of an asset has been published in terms of that paragraph, and—
(a) the expenditure allowable in terms of paragraph 20 incurred before the valuation date in respect of that asset—
(i) is equal to or exceeds the proceeds from the disposal of that asset; and
(ii) exceeds the market value of that asset on valuation date,
the valuation date value of that asset must be the higher of—
(aa) that market value; or
(bb) those proceeds less the expenditure allowable in terms of paragraph 20 incurred on or after the
valuation date in respect of that asset; or
(b) the provisions of item (a) do not apply, the valuation date value of that asset must be the lower of—

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 (i) that market value; or
(ii) the time-apportionment base cost of that asset as contemplated in paragraph 30.
(4) Where the provisions of subparagraph (3) do not apply, the valuation date value of that asset, contemplated
in subparagraph (1), is the time-apportionment base cost of that asset, as contemplated in paragraph 30.

35.   Proceeds from disposal.—(1)  Subject to subparagraphs (2), (3), and (4), the proceeds from the disposal of
an asset by a person are equal to the amount received by or accrued to, or which is treated as having been received by,
or accrued to or in favour of, that person in respect of that disposal, and includes—
(a) the amount by which any debt owed by that person has been reduced or discharged; and
(b) any amount received by or accrued to a lessee from the lessor of property for improvements effected to that
property.
(2)  The amount of the proceeds from a disposal by way of a value shifting arrangement is determined as the
market value of the person’s interests to which subparagraph 11 (1) (g) applies immediately prior to the disposal less
the market value of the person’s interests immediately after the disposal, which amount shall be treated as having been
received or accrued to that person.
(3)  The proceeds from the disposal of an asset by a person, as contemplated in subparagraph (1) must be reduced
by—
(a) any amount of the proceeds that must be or was included in the gross income of that person or that must be
or was taken into account when determining the taxable income of that person before the inclusion of any
taxable capital gain;
(b) any amount of the proceeds that has been repaid or has become repayable to the person to whom that asset
was disposed of; or
(c) any reduction, as the result of the cancellation, termination or variation of an agreement or due to the
prescription or waiver of a claim or release from an obligation or any other event, of an accrued amount
forming part of the proceeds of that disposal.
(4)  Where during any year of assessment a person has become entitled to any amount which is payable on a date
or dates falling after the last day of that year, that amount must be treated as having accrued to that person during
that year.

65. Involuntary disposal.—(1)  A person may elect that this paragraph applies in respect of the disposal of an
asset (other than a financial instrument), where—
(a) that asset is disposed of by way of operation of law, theft or destruction;
(b) proceeds accrue to that person by way of compensation in respect of that disposal;
(c) those proceeds are equal to or exceed the base cost of that asset;
(d) (i) an amount at least equal to the receipts and accruals from that disposal has been or will be ex pended
to acquire one or more asset (hereinafter referred to as the “replacement asset or assets”);
(ii) all the replacement assets constitute assets contemplated in section 9 (2);
(iii) the contracts for the acquisition of the replacement asset or assets have all been or will be concluded
within 12 months after the date of the disposal of that asset; and
(iv) the replacement asset or assets will all be brought into use within three years of the disposal of that
asset:
Provided that the Commissioner may extend the period within which the contract must be concluded or asset
brought into use by no more than six months if all reasonable steps were taken to conclude those contracts or
bring those assets into use; and
(e) that asset is not deemed to have been disposed of and to have been reacquired by that person.
(2)  Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the
disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5) and
(6) be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.
(3)  Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person
must, in applying subparagraphs (4) and (5), apportion the capital gain derived from the disposal of that asset to each
replacement asset in the same ratio as the receipts and accruals from that disposal respectively expended in acquiring
each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring all those
replacement assets.
(4)  Where a replacement asset contemplated in subparagraph (1) constitutes a depreciable asset, the person must
treat as a capital gain for a year of assessment, so much of the disregarded capital gain contemplated in subparagraph
(3), as bears to the total amount of that disregarded gain apportioned to that replacement asset as contemplated in
subparagraph (3) the same ratio as the amount of any deduction or allowance allowed in that year in respect of the
replacement asset bears to the total amount of the deduction or allowance (determined with reference to the cost or
value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of that
replacement asset.
(5)  Where a person during any year of assessment disposes of a replacement asset and any portion of the
disregarded capital gain which is apportioned to that asset, has not otherwise been treated as a capital gain in terms of

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this paragraph, that person must treat that portion of disregarded capital gain as a capital gain from the disposal of that
replacement asset in that year of assessment.
(6)  Where a person fails to conclude a contract or fails to bring any replacement asset into use within the period
prescribed in subparagraph (1) (d) (iii) or (iv), subparagraph (2) shall not apply and that person must—
(a) treat the capital gain contemplated in subparagraph (2) as a capital gain on the date on which the relevant
period ends;
(b) determine interest at the prescribed rate on that capital gain from the date of that disposal to the date
contemplated in item (a); and
(c) treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s
aggregate capital gain or aggregate capital loss.
(7)  Where a replacement asset or assets constitute personal use assets, the provisions of this paragraph shall not
apply.

66.   Reinvestment in replacement assets.—(1)  A person may elect that this paragraph applies in respect of the
disposal of an asset, where—
(a) that asset qualified for a deduction or allowance in terms of section 11 (e), 11D (2), 12B, 12C, 12DA, 12E,
14, 14bis or 37B;
(b) the proceeds received or accrued from that disposal are equal to or exceed the base cost of that asset;
(c) an amount at least equal to the receipts and accruals from that disposal has been or will be expended to
acquire one or more assets (hereinafter referred to as the “replacement asset or assets”), all of which will
qualify for a capital deduction or allowance in terms of section 11 (e), 11D (2), 12B, 12C, 12DA, 12E or
37B;
(d) all the replacement assets constitute assets contemplated in section 9 (2) (b)
(e) the contracts for the acquisition of a replacement asset or assets are or will be concluded within 12  months after
the asset contemplated in item (a) is disposed of and are all brought into use within three years after that
disposal: Provided that the Commissioner may extend the period by which the contracts must be concluded
or assets brought into use by no more than six months if all reasonable steps were taken to conclude those
contracts or bring those assets into use; and
(f) that asset is not deemed to have been disposed of and to have been reacquired by that person.
(2)  Where a person has elected in terms of subparagraph (1) that this paragraph must apply in respect of the
disposal of an asset, any capital gain determined in respect of that disposal must, subject to subparagraphs (4), (5), (6)
and (7), be disregarded when determining that person’s aggregate capital gain or aggregate capital loss.
(3)  Where a person acquires more than one replacement asset as contemplated in subparagraph (1), that person
must, in applying subparagraphs (4), (5) and (6), apportion the capital gain derived from the disposal of that asset to
each replacement asset in the same ratio as the receipts and accruals from that disposal re spectively expended in
acquiring each of those replacement assets bear to the total amount of those receipts and accruals expended in acquiring
all those replacement assets.
(4)  A person must treat as a capital gain for a year of assessment so much of the disregarded capital gain
contemplated in subparagraph (2), as bears to the total amount of that disregarded capital gain apportioned to that
replacement asset as contemplated in subparagraph (3) the same ratio as the amount of any deduction or allowance
allowed in that year in terms of section 11 (e), 11D (2), 12B, 12C, 12DA, 12E or 37B in respect of the replacement
asset bears to the total amount of the deduction or allowance in terms of that section (determined with reference to the
cost of value of that asset at the time of acquisition thereof) which is allowable for all years of assessment in respect of
that replacement asset.
(5)  Where a person during any year of assessment disposes of a replacement asset and any portion of the
disregarded capital gain which is apportioned to that asset as contemplated in subparagraph (3), has not been treated as
a capital gain in terms of subparagraph (4) or (6), that person must treat that portion of dis regarded capital gain as a
capital gain from the disposal of that replacement asset in that year of assessment.
(6)  Where during any year of assessment a person ceases to use a replacement asset for the purposes of that
person’s trade and any portion of the disregarded capital gain which is apportioned to that asset as contemplated in
subparagraph (3), has not been treated as a capital gain in terms of subparagraph (4) or (5), that person must treat that
portion of disregarded capital gain as a capital gain for that year of assessment.
(7)  Where a person fails to conclude a contract or to bring any replacement asset into use within the period
prescribed in subparagraph (1) (e), subparagraph (2) shall not apply and that person must—
(a) treat the capital gain contemplated in subparagraph (2) as a capital gain on the date that the relevant period
ends;
(b) determine interest at the prescribed rate on that capital gain from the date of that disposal to the date
contemplated in item (a); and
(c) treat that interest as a capital gain on the date contemplated in item (a) when determining that person’s
aggregate capital gain or aggregate capital loss

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