Chapter 11 Assessed Loss

Question 1

Purchase of a company with an assessed loss

Answer 1

Where there is a change in shareholding of a company with an assessed loss, or a change in the members interest in a close corporation with an assessed loss, SARS has the power to disallow the set-off of the assessed loss against any income arising as a result of the change in shareholding or members’ interests.
SARS will exercise this power if it is satisfied that the shares or interest were acquired solely or mainly for the purpose of using the assessed loss in order to avoid tax.

Question 2

Definition of assessed loss

Answer 2

an assessed loss is incurred when the deductions exceed the income the income of the taxpayer for the year.
In order to determine the taxable income from trade the taxpayer may set-off
Any balance of assessed loss brought forward from the previous year
Any assessed loss incurred in the current year in carrying on any other trade.