Gross income: Amount

Question 1

Lategan: Even without “or otherwise”: amount means?

Answer 1

1. Not only money
2. Value of property earned by tax payer
3. Whether corporeal or incorporeal
4. Which has a money value

Question 2

What does Butcher Bros case hold?

Answer 2

If receipt or accrual is not in cash, it has to have a money value in order to be included in general income.

The value of the receipt or accrual = value of asset other than cash

To determine the value of the asset you look at the open market but there’s exceptions in the 7th schedule i.e. fringe benefits

Question 3

Barter transactions

Answer 3

The TP gives up a certain asset and receives something else
Its the value in money of what the TP receives that is included in the TP gross income.

Question 4

CIR v Butcher Bros

Answer 4

Facts: TP obtained immovable property that was subject to a very long lease agreement of 50 years etc.
LQ: When the buildings were completed, did an amount “accrue” to the tax payer?
Court: on erection: dominuim vested in the TP but TP received little advantage because of the 40 years still remaining

cant value this “right” to have building erected therefore no amount accrued therefore not included in TP GI

Question 5

Lace Property Mines

Answer 5

Facts: TP disposed of mineral rights to a 3rd party. 3rd party had to pay consideration in shares. Receiver of revenue says those shares are not worth 5 shillings each but actually 12 shillings each.

LQ: What should be included in the TP GI? Purchase Price at 250 000 pounds or value of shares at 12 shillings

Court in deciding this matter said that we have to look at the intention of the parties to find out what the consideration was

Outcome: the intention of these parties was for the consideration to be shares

Question 6

Brummeria Renaissance

Answer 6

LQ: Was the right to use the loan capital interest-free an “amount”

Court:
1. All that is required is that the rights are capable of being valued in money
2. Whether receipt or accrual can be turned into money is only one of the ways to determine whether it has a money value
3. Previous cases that stated that TP must be able to turn property into money - was wrong i.e this is not the test
4. whether property has a value is an objective test not subjective

Therefore, right to use the loan capital interest free had a money value. A right to use a loan capital interest-fee is a valuable right

Question 7

Criticisms of Brummeria?

Answer 7

1. Court was wrong in holding TP need not be able to turn receipt into money - went against prior cases
2. Goes against tax policy - 1 pillar f a good tax system is that the TP should be able to pay the tax that they are required to pay - how are they gonna do that if the cant turn receipt into money?
3. Uncertainties - re court never discussed how the right to use loan interest-free valuation should be determined. Also uncertainty about the scope of the judgement. However, SARS did release an IN in 2012 to state that Brummeria will only apply to cases that are similar in fact.

Question 8

Stander Case

Answer 8

Facts: Incentive (trip to france)
Case was decided wrong as the court said he could not turn the trip into cash - wrong because of Brummeria which states you merely have to be CAPABLE of turning it into money for it to be deemed an “amount”