- 15 Marks
ATAX – Nov 2018 – L3 – Q5 – Capital Gains Tax
Calculation of capital gains tax for properties sold, inherited, and acquired by the government, with tax authority determination.
Question
As a senior official in a firm of tax consultants, your tax manager has just discussed issues relating to one of your clients.
The summary of the discussion is as follows:
Mr. Eket, a native of Oron who resides in Uyo, Akwa Ibom State, owned two properties, one in Kano and the other in Benin. The property in Kano was built at a cost of N23 million, while that in Benin was acquired at a cost of N19.5 million. In the year 2012, the property in Kano was sold by Mr. Eket for N32 million, with disposal expenses amounting to N2.80 million.
In the year 2014, Mr. Eket died, and the property in Benin was transferred to his wife, Emem, by the executor of his will. The market value of the properties in Kano and Benin were N28 million and N23 million, respectively.
In October 2016, the property in Benin was acquired by the Edo State Government for highway construction, and a compensation of N27 million was paid to Emem.
Required:
- (a) Determine the capital gains tax payable (if any).
(5 Marks) - (b) Determine the relevant tax authority to which the liability is due.
(5 Marks) - (c) Give reasons for the treatment in (a) and (b).
(5 Marks)
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