n Business Tax and Company Law Quarterly - Gains and losses on financial instruments - the ambit of section 24J(9)

Volume 1, Issue 3
  • ISSN : 2219-1585


Since the introduction of section 24J into the Income Tax Act 58 of 1962 there appears to be disparate treatment among taxpayers, particularly in the financial services industry, of the application of subsection (9) which caters for an election to apply a market-value methodology in determining gains and losses for 'instruments', 'interest rate agreements' and 'option contracts'. The disparity relates to taxpayers who apply a mark-to-market accounting basis as the tax basis of gains and losses in relation to financial instruments,regardless of the election and approval required in subsection (9), those who apply under the elective provisions where no response is received from the South African Revenue Service (SARS) and those who do apply to SARS but the response has been that the provisions of section 24J(9) only apply to qualifying financial instruments which constitute 'trading stock'. Recently though, it appears that SARS is taking a closer look at the applications in terms of section 24J(9), not only in relation to the valuation methodologies applied for accounting purposes in determining accounting gains and losses, but also with regard to the ambit of the subsection extending beyond qualifying 'trading-stock' financial instruments. This article explores the ambit of section 24J(9), in particular whether the subsection is restricted to trading stock.

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