Question Tag: Property Transactions

Your Tax Manager has just sent a memo in which you were asked to analyse the situation in a client’s file with the sole aim of determining the Chargeable Gains:

Contents of Memo:

• Dr. Alexander Bold purchased a Duplex in Parkview Estate at a cost of N80 million on January 2009. It was used as a private residence. Another property was purchased in Banana Island in the year 2012, and Dr. Bold transferred the Parkview Estate Property to his wife as a birthday present on August 12, 2013. The market value of the property was N140 million. As a result of incessant flooding in Parkview Estate, the property was finally disposed of for N200 million on January 31, 2014 by the wife.
• An option on a piece of land in Magodo, Lagos State, was sold by Dr. Bold for a sum of N120 million to Mr. Robert on July 1, 2010. Mr. Robert exercised the right to purchase the land for N150 million in 2013 and sold the property for N400 million in 2014.
• Mr. Clyde, a friend of Dr. Bold, purchased a piece of property belonging to Bold and Wife Limited in Badagry at a cost of N240 million. The two parties agreed on installment payments starting with an installment of N80 million on July 1, 2010, and the balance of N80 million every 6 months thereafter. The last installment could not be settled on time because of Mr. Clyde’s illness, who managed to pay N20 million on January 1, 2013. The cost of the property to Bold and Wife Limited was N180 million.

Mr. Clyde eventually died on March 5, 2013, hence the balance of N20 million could not be recovered and this was written off as Bad Debt with the consent of the Federal Inland Revenue Service.

• Mr. Saxon (S.A.N), a Legal Practitioner from the Chambers of Saxon in Lagos, was involved in a case on behalf of Dr. Bold’s wife. The case lasted for about 4 years and judgment was received in favor of the client. The fees were settled partly by cash and partly with an acre of land belonging to Mrs. Bold at Lekki Phase Two in Lagos. Although the debt was N85 million, the property was valued at N60 million. Mr. Saxon eventually sold the property for N220 million.

Required:

i. Chargeable gains (5 marks)
ii. Opinion on all the above transactions (9 marks)
iii. The role of Federal Inland Revenue Service on the issue of Bad Debt on payment by Mr. Clyde (2 marks)