Tutorial 13 -Real Property Gains Tax - Part II
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School
INTI College Sabah**We aren't endorsed by this school
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ACCOUNTING 11113
Subject
Accounting
Date
Dec 23, 2024
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7
Uploaded by LieutenantTank8324
ABFT1024 TAXATION I __________________________________________________________________________________________ TUTORIAL 13: REAL PROPERTY GAINS TAX – Part II Question 1Mr. Lai, a Malaysian citizen, bought a house at a price of RM400,000 which has paid in fullon 20 August 2017. The house was transferred to him on 1 January 2018. There was nowritten agreement for the purchase of the house. Expenditure incurred on the house were asfollows: RM Cost of extension to bungalow 50,000 Stamp duty on transfer 4,000 Interest on mortgage loan 25,000 Legal expenses in defending the title of the house 5,000 In June 2019, Mr. Lai received RM10,000 from the insurance company for damage to theroof of the house. In addition, he received RM5,000 as deposit from a potential buyer whocalled off the deal eventually. The deposit was forfeited. The house was subsequently sold under sale and purchase agreement dated 15 January 2021for RM800,000. Mr. Lai incurred the following expenditure in connection with the sale: RM Valuation fee 8,000 Cost of advertisement 5,000 Brokerage fees 25,000 Required: (a) Compute the real property gains tax payable by Mr. Lai assuming he does not want to claim exemption from private residence. (b) How would you answer in (a) change if there existed a written agreement date 15 July 2017 for the acquisition of the house by Mr. Lai? (c) How would your answer in (a) change if Mr. Lai is a non-Malaysian citizen or a non permanent resident of Malaysia at all material times?T13 - 1 ABFT1024 TAXATION I
__________________________________________________________________________________________ Answer (a)Mr. Lai Computation of Real Property Gains Tax for YA2021 RM RM RMDisposal price 800,000Consideration receivedLess: Permitted expensesCost of extension to house 50,000Legal fees defending the title 5,00055,000Less: Incidental costs of disposalValuation fees 8,000Brokerage 25,000Cost of advertisement 5,000 38,000 93,000707,000Acquisition priceConsideration paid 400,000Add: Incidental costs of acquisitionStamp duty on transfer 4,000Interest expense NIL 4,000404,000Less: RecoveriesInsurance recoveries 10,000Deposit forfeited 5,000 15,000 (389,000)Chargeable gain 318,000Less: Schedule 4 exemption10% x 318,000 or RM10,000Whichever is higher 31,800
Gain subject to RPGT 286,200RPGT at 20% (disposal in the fourth year)57,240Answer (b)The acquisition date would be at 15 July 2017 in the event there was a written agreement.However, the holding period of the house remains unchanged and the RPGT is remained atRM57,240. Answer (c)RPGT rate of 30% would be applied if Mr. Lai is a non-citizen or non-permanent resident of Malaysia and the disposal takes place within five years of the acquisition. The RPGT tax would thus be 30% x RM286,200 = RM85,860T13 - 2 ABFT1024 TAXATION I __________________________________________________________________________________________ Question 2Krisna is a Malaysian citizen. He disposed of a piece of land on during the year 2021. The land was owned as an investment that he rented out since its acquisition. In 2019, Krisna disposed of an apartment that resulted in an allowable loss of RM143,000. Details of the disposal of the land are as shown below: RM Consideration paid 200,000 Deposits forfeited from intended buyer 20,000 Agent’s fees on disposal 3,000 Consideration received 500,000 Date of acquisition 20.2.2017 Date of disposal 15.8.2021 Required: Compute the real property gains tax payable for the YA2021 arising from Krisna’s disposal of the land. AnswerKrisna
Real Property Gains Tax Computation for YA2021RM RMConsideration received 500,000Less: Incidental costs of disposalAgent’s fees (3,000)Disposal price 497,000Consideration paid 200,000Less: Deposit forfeited (20,000)Acquisition price (180,000)Chargeable gain 317,000Less: Schedule 4 exemption10% of RM317,000 or RM10,000Whichever is the higher (31,700)283,300Less: Allowable loss from apartment (143,000)Gains subject to RPGT 142,300RPGT payable (Disposal in the 5th year) RMRM142,300 x 15% 21,345T13 - 3 ABFT1024 TAXATION I __________________________________________________________________________________________ Question 3On 12.3.2017, Tara Foong signed a sale and purchase agreement to acquire a piece of landfor RM250,000. He made full payment of the purchase price on 10.6.2017 and tookpossession of the land on 11.6.2017. The title to the land was transferred to him on 10.9.2017. He then set up an organic farm on this piece of land. His expenditure was as follows:RM Stamp duty on acquisition 4,000 Legal fees on acquisition 1,980 Drainage and irrigation system 13,500 Farm building 22,800
Fencing 5,600 Legal fees to defend his title to the land 27,000 On 8.2.2021, he disposed of the entire organic farm for RM677,000. His expenditure on disposal was as follows: Real estate agent’s fees 16,500 Advertisement for sale 2,500 Valuation fees 1,000 Required: (a) State the date of acquisition of the land by Tara Foong, giving reasons for your answer. (b)Compute the real property gains tax liability of Tara Foong in respect of the disposal of the organic farm. (c) State, with reasons, what the date of acquisition of the land would have been if TaraFoong did not sign a written agreement regarding its purchase. All other factsregarding the land remain the same as above. Answer(a) Date of acquisition The date of the written agreement is the date of acquisition Hence, Tara Foong acquired the land on 12.3.2017.T13 - 4 ABFT1024 TAXATION I __________________________________________________________________________________________ (b) Tara Foong Computation of Real Property Gains Tax for YA 2021 RM RM RMDisposal date: 8.2.2021Consideration received 677,000Less: Enhancement costDrainage and irrigation system 13,500
Farm buildings 22,800Fencing 5,600(41,900)Less: Legal cost of defending title (27,000)Less: Incidental cost on salesReal estate agent’s fee 16,500Advertisement for sale 2,500Valuation fee 1,000(20,000)Disposal price 588,100Acquisition date: 12.3.2017Consideration paid of land 250,000Add: Incidental cost of purchaseLegal fees 1,980Stamp duty 4,0005,980Acquisition price (255,980)Chargeable gain 332,120Less: Schedule 4 exemption10% of RM332,120 or 10,000Whichever is the higher (33,212)Gains subject to RPGT 298,908RPGT at 20% (Disposal in 4th year) 59,782(c) Date of acquisition in the absence of a written agreement In the absence of a written agreement, the date of acquisition is the date thetransaction is completed. The date the transaction is completed is the earlier of fullpayment or the transfer of the assets. Therefore, Tara Foong would have acquired thefarm land on 10.6.2017.
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