Trading Stock Movements: Year End 31 December

Donations of Stock

Case 01:
The taxpayer donated stock with a cost price of R2 000 and a market value of R4 000.
The taxpayer received a section 18A certificate.

Goods Donated s22(8): Recoupment at Cost 2 000

Final taxable income for the year before the s18A allowance was R50 000.

Taxable Income Before S18A Allowance 50 000

Less S18A Donation to PBO
Actual Donation 2 000 (2 000)
Limit: 10% of Taxable Income 5 000
Taxable Income: 48 000

Final taxable income for the year before the s18A allowance was R10 000.

Taxable Income Before S18A Allowance 10 000

Less S18A Donation to PBO
Actual Donation 2 000
Limit: 10% of Taxable Income 1 000 (1 000)
Taxable Income: 9 000

Case 02:
The taxpayer donated stock with a cost price of R2 000 and a market value of R4 000.
The taxpayer did not receive a section 18A certificate.

Goods Donated s22(8): Recoupment at MV 4 000

Final taxable income for the year before the s18A allowance was R50 000.

Taxable Income Before S18A Allowance 50 000

No Donation Deduction 0
Taxable Income: 50 000
Private or Domestic Use:
The owner of took stock with a cost price of R1 000 and a market value of R2 000 to use in renovations for
his home.

Goods Taken for Non-Trade Use: s22(8) Recoupment at Cost 1 000

The owner took stock that was damaged and the written down value was R500.

Goods Taken for Non-Trade Use: 500

s22(8) Recoup at Written-Down Value

Trading Stock Distributed as Dividend:

Paola decided to distribute hardware products as dividend to their shareholders.
The stock distributed had a market value of R10 000 and a cost of R5 000.

Dividend in Specie: S22(8) Recoup at MV 10 000

Trading Stock Used in Trade:

Paola used hardware stock with a cost of R750 and a market value of R1 500 to effect improvements on
some of their stores.

Goods Taken for Trade-Use: S22(8) Recoup at MV 1 500

Goods Taken for Trade-Use: S22(8) Deduction (1 500)

Trading Stock to Employees:

Stock with a market value of R3 000 was given to staff.

S22(8) Recoup at MV 3 000

S11(a) Employee Rations at MV (3 000)

Sold at Less Than the Market-Value:

Paola took stock with a market-value of R1 000 and a cost of R800 to sell to Carlito’s for R900

S22(8) Recoupment at Market-Value 1 000

S22(8) Deduction at Consideration (900)
Opening Stock:

The prior year closing stock was R2 250 000.

Stock with a value of R500 000 had decreased in value to R300 000.
Hannah’s Hardware a competitor of Paola had shut down to lack of business during COVID-19. They had sent
their left-over stock to Paola.
This stock cost R400 000 and a market-value of R800 00.

Opening Stock: S22(2)

At Cost: 2 250 000
Prior Year Write-Down to NRV: (200 000)
Stock Received for No Consideration: 800 000 (2 850 000)

Purchases:

Paola had purchased R1 000 000 worth of trading stock during the year of assessment.
70% of this stock was sold during the year of assessment.

Purchases: Section 11(a) (1 000 000)

Closing Stock:

Certain stock from a previous financial year still remained unsold. This stock cost R150 000.
The stock written down to R300 000 was a mistake its value should be R600 000.
Stock from Hannah’s Hardware remains unsold and was excluded from the R150 000 stock take.

Closing Stock: S22(1)

At Cost: 150 000
Write-Back Limited to Cost: 500 000 – 300 000 200 000
30% Unsold: 30% * 1 000 000 (Purchases) 300 000
Stock for No Consideration 800 000 1 450 000

Certain stock from a previous financial year still remained unsold. This stock cost R150 000.
The stock written down to R300 000 was a mistake its value should be R400 000.
Stock from Hannah’s Hardware remains unsold and was excluded from the R150 000 stock take.

Closing Stock: S22(1)

At Cost: 150 000
Write-Back Limited to Cost: 400 000 – 300 000 100 000
30% Unsold: 30% * 1 000 000 300 000
Stock for No Consideration 800 000 1 350 000
Work-in-Progress and Consumables:

Opening Stock includes the following amounts:

Machines for Sale R2 000 000
Work-in-Progress R500 000
Consumables R20 000

Opening Stock: S22(2) (2 520 000)

At Cost: 2 000 000
Work-in-Progress 500 000
Consumables 20 000

Labour and Direct Overheads in respect of the manufacturing of the machines amounted to R4 000 000.

Labour and Direct Overheads: Section 11(a) (4 000 000)

Closing Stock consisted of the following:

o Stock on hand amounted to R 1 220 000.
o 2 machines with a cost of R50 000 each were considered obsolete and the commissioner deemed
them to be reflected at 50% of their cost.
o Consumables amounted to R150 000.
o Spare parts totalled to R30 000 that were not used during the current year of assessment.
o Work-in-Progress consists of labour used R22 000 and components used of R28 000.

Closing Stock: S22(1) 1 430 000

At Cost: 1 220 000
Write Down: 2 * 20 000 * 50% (20 000)
Work-in-Progress: 22 000 + 28 000 50 000
Consumables 150 000
Spare Parts 30 000
Change in Intention:
Paola has owned a company that purchases second hand vehicles and flips them.
She owns a vehicle that she uses to travel around the country to inspect potential vehicles at the customers’
premises. 01 June 2022: She decides to flip that vehicle as stock to sell it.

01 June 2022 the following values are applicable:

The original cost was R230 000.
The carrying value R110 000.
The capital allowances claimed so far have been R100 000.
The depreciation has been R120 000.
The market value would be R150 000.
Paola never managed to sell the asset during the year of assessment which ends on 31 May 2023.

01 June 2022
Tax Value = Cost – Total Capital Allowances
= 230 000 – 100 000
= 130 000
Recoupment = SP (Limit: to Cost) – Tax Value 20 000
= 150 000 – 130 000
= 20 000
Proceeds = Selling Price – Recoupment
= 150 000 – 20 000
= 130 000
Base Cost = Cost – Total Capital Allowances
= 230 000 – 100 000
= 130 000
Capital Gain = Proceeds – Base Cost
= 130 000 – 130 000
= 0
S12(2)(c) Deduction at MV (150 000)
31 May 2023
Closing Stock: S22(2) 150 000
01 June 2023:
Opening Stock: S22(1) (150 000)

Paola has owned a company that purchases second hand vehicles and flips them. She took a vehicle from
the yard to use as her new vehicle to travel to customers.
01 June 2022: She decides to take the vehicle out of trading stock and use it as a capital asset.

01 June 2022 the following values are applicable:

The market value would be R150 000.
Assume 4 years write off period.

01 June 2022
S22(8)(b) Recoupment Recoupment at MV 150 000
S11(e) Wear and Tear 150 000/4 years (37 500)