How do you deal with capital gains tax where the property disposed of was owned by more than one natural person?
Where a property owned by more than one person is sold, the CGT must be split based on the ownership as per legal agreements between the parties.
This treatment is based on definitions of the Act:
1. Para 2 of the Eighth Schedule requires that every taxpayer, on disposal of an asset, must recognise a capital gain/loss. Further, the 8th Schedule defines an asset as including "a right to immovable property".
2. Taking the above at face value therefore, if I own 1/3 of an asset and the asset is sold, I would need to recognise a capital gain or loss.
3. In addition, para 35 starts the definition of proceeds as "the amount accruing to the taxpayer from the disposal of an asset". As a 1/3 owner, I'm only entitled to 1/3 of the total sales value.
4. The same principle applies to base cost - what did I pay for my share? That's the base cost I take into account.