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THE seasonally adjusted Kagiso purchasing managers index (PMI) fell steeply in September, dropping 7.4 index points to a worse than expected 49.1, data on Tuesday showed.

South African PMI back in contraction territory

The tax consequences of not doing so could prove extremely costly

It is common knowledge that investing takes time and patience,and that the chances of a good return are increased the longer the investment horison.From an income tax perspective, there's also an incentive to hold shares for at least three years before selling them.

This is because of the ‘safe haven’ tax rules in Section 9C of the Income Tax Act, which provide that the proceeds from the sale of shares (with certain exceptions) are automatically deemed to be capital if held by the taxpayer for at least three years.

This essentially means that the more favourable capital gains tax rate (a maximum rate of 13.3%, as opposed to the income tax rate of a maximum of 40%) will apply to profits made on shares that are held for three years or more.

Where shares are held for less than three years, the normal rules governing capital gains versus income gains must be applied to determine whether the gain is capital or income in nature. If the gain is capital in nature, the capital gains tax rate will apply; and if it is income in nature, the income tax rate will apply.

There is a large volume of legal precedent governing the distinction between capital and income gains,and the approach of the courts has been to place a high emphasis on the intention with which the taxpayer acquired the shares—was the dominant purpose for investment (capital) or was it for speculation (income)?

 Speculation concerns the subsequent sale of the shares at an increased price, whilst investment is the holding of the shares more or less ‘for keeps’ in order to earn dividend income.However, a potential problem that a taxpayer faces with regard to the argument that he acquired shares in order to earn dividend income is that the dividend yields of shares on the JSE are generally extremely low,and it is therefore often difficult to argue that this is a rational investment strategy.

Our strongest case law on this issue, much of which was decided in a time when dividends were relatively higher, would certainly not prove helpful to a taxpayer who, in addition to earning dividend income, sought to bolster the performance of the portfolio by selling at a profit to any meaningful degree.

Two cases in point: In the case of Tod, which was decided in the Natal Provincial Division of the High Court in 1983, the taxpayer was retired and lived almost entirely on the dividends from his shares. Tod had embarked on a plan in order to increase his annual dividends, whereby he would purchase a share on which a dividend was imminent, and as soon as the dividend had been declared, he would sell the share,usually at a profit.

The court held that in order for profits on the sale of shares not to be subject to income tax, the taxpayer must have a dominant purpose of maximising dividend income, and that any selling of shares must be ‘purely incidental’ to this objective.Tod's share transactions were held not to be purely incidental to the objective of maximising dividend income, and the proceeds were subject to income tax.

In Nussbaum's case, which was decided in the Appellate Division of the High Court in 1996, Nussbaum was a retired schoolteacher who had inherited a substantial share portfolio.He testified that he always acquired shares for the earning of dividend income, and that he had never bought a share for profitable resale;however, his modus operandi was to sell a share if the dividend yield had fallen to unacceptable levels.

Since a fall in the dividend yield was generally caused by an increase in the price of a share, Nussbaum generally made profits,and the court found that even though he had the primary purpose of earning dividend income, there was a ‘secondary purpose’ of dealing in shares, which rendered profits subject to income tax.

Market conditions aside, it is therefore wisest from a tax perspective to wait a minimum of three years before selling shares.

Source: By David Warneke (Tax breaks)

 

The Republican-led House voted early Sunday morning to delay President Obama’s health-care law by one year — and to repeal a tax to pay for it — all but assuring the first federal government shutdown in 17 years.

The latest developments increase the odds of at least a partial government shutdown, which would begin on Tuesday. Obama and Senate Majority Leader Harry Reid have said they won’t accept changes to the health-care law in exchange for temporary government funding. If House Republicans and Senate Democrats cannot agree by the Tuesday-morning deadline, thousands of government employees will be unable to work.

A government shutdown would likely mean the U.S. jobs report for September won’t be released on Friday. The employment data would be the last major labor-market release before the Federal Reserve meets in October to decide whether to slow monetary stimulus.

 Another budget deadline, one with more potential to roil markets than a shutdown, will attract attention ahead of Oct. 17, when the U.S. reaches its debt limit. Obama on Friday urged Congress to raise the debt limit before Oct. 17 and act to avert the shutdown

Certainly doesn't bode well for Monday. (JaDEB, Moneypenny has been assigned yard work by Moonraker - should be there again tomorrow.) 

   

Looks like the 40% odds of a shutdown may now be higher ..

And bear in mind that this is brand new law! 

Quote from: act

Subsection (1) comes into operation on 1 January 2013 and applies in respect of years of assessment commencing on or after that date.

I don't see, or can't find, any changes when compared to the pdf attached. Section 4.1. What exactly is 'the brand new law' ?

http://www.sharenet.co.za/v3/sens_display.php?tdate=20130926085500&seq=8

Release Date: 26/09/2013 08:55:00      Code(s): UUU        Uranium One Finalisation Announcement for Going Private Transaction

Uranium One Inc
(Incorporated in Canada)
(Registration number: 15096422420)
Share code on the JSE: UUU & ISIN: CA91701P1053
Share code on the TSX: UUU & ISIN: CA91701P1053
(“Uranium One” or the “Company”)

News Release

September 26, 2013

          Uranium One Finalisation Announcement for Going Private Transaction

Toronto, Ontario – Uranium One Inc. (the “Corporation”; TSX: “UUU”; JSE: “UUU”, ISIN
CA91701P1053) today announced that all required regulatory approvals have now been received
and all conditions precedent have been met to complete the arrangement agreement between the
Corporation, JSC Atomredmetzoloto (“ARMZ”) and its affiliate Uranium One Holding N.V.
(formerly Effective Energy N.V.) under which Uranium One Holding will acquire all of the
common shares of Uranium One that it and its affiliates do not already own for cash consideration
of C$2.86 per share. Closing of the transaction is now scheduled to take place on Friday, October
18, 2013.

On the closing date, each shareholder of the Corporation will be entitled to receive a payment of
CDN$2.86 per share. Each shareholder in South Africa will receive ZAR27.36 per share at the
exchange rate of CDN$1.00 = ZAR9.56683 established as of the close of business on September
25, 2013 (rounded up to the nearest cent).

The relevant dates for the transaction for shareholders of the Corporation in South Africa will be
as follows:

-   Conversion Reference Date                    September 25, 2013
-   Finalisation Announcement                    September 26, 2013
-   Closing of South African Branch Register     September 27, 2013
-   Last Day to Trade on JSE                     October 11, 2013
-  Suspension of Listing on JSE                 October 14, 2013
-   Payment Record Date (Closing Date)           October 18, 2013
-  Expected South African Payment Date          October 21, 2013
-   Termination of Listing                       October 22, 2013

US markets have shot up after the news ..

Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.

Full text:- http://www.forexlive.com/blog/2013/09/18/fomc-monetary-policy-announcement-decision-statement-18-september-2013/

Any takers for a down day tomorrow ? 

...and

Blowing it up with dynamite is another solution. Sloane is an expert at doing that. He opens a folder on his laptop that he named "Blow Jobs" and shows films of stranded ships that collapse like high-rise buildings. "Blow jobs are always an option," says Sloane with a grin, "but not for Giglio."

Check the REAL situation re. unemployment etc. in US with Shadow Gov. Stats.

http://www.shadowstats.com/alternate_data/unemployment-charts

http://www.shadowstats.com/alternate_data