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Author Topic: Selling your shares after 3 years.  (Read 21224 times)

Orca

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Selling your shares after 3 years.
« on: February 12, 2018, 03:51:51 pm »
Listening to Simon Brown's podcast this morning tells me he has not heard of Section 9C of the Income Tax Act.
In short, a listener wrote to Just One Lap to say he sells his shares every 3 years to make use of the R40k exclusion amount and to readjust his base cost upward. This method will prevent him getting a huge tax bill when he retires.

Simon's argument was that SARS will eventually see this as tax evasion and tax it as revenue.
This is not so as the Section 9C was written in such a way to exclude "intention" that Section 8 allows. So holding on for the 3 year duration does not give you or the state the right to chose the gains as Capital or Revenue. It has to be seen as Capital only and taxed as CGT.
« Last Edit: February 12, 2018, 08:52:53 pm by Orca »
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gcr

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Re: Selling your shares after 3 years.
« Reply #1 on: February 12, 2018, 06:41:20 pm »
I wonder if Simon will restate his answer
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Orca

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Re: Selling your shares after 3 years.
« Reply #2 on: February 12, 2018, 09:02:40 pm »
If he does not I will rap him on the knuckles.

Further to this. there is a common concept that if you buy a share and trade it then SARS will see you as a trader in shares for revenue like in forever.

Once you stop trading the share and hold it for 3 years then article 9C kicks in. You are no longer a trader.
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gcr

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Re: Selling your shares after 3 years.
« Reply #3 on: February 12, 2018, 09:07:33 pm »
My advise to the listener would have been sell a portion of the shares and then buy additional shares with the proceeds, all this does is bring a substantial profit gain and then neutralize the difference between original price and current price. This also helps when selling out as it will reduce your CGT bill as it's based on current prices versus purchase price, How SARS will pick this up I'm not sure as they only look at base price versus selling price. However you could come unstuck if the market takes a big knock
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gcr

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Re: Selling your shares after 3 years.
« Reply #4 on: February 12, 2018, 09:14:24 pm »
Quote from: Orca on February 12, 2018, 09:02:40 pm
If he does not I will rap him on the knuckles.

Further to this. there is a common concept that if you buy a share and trade it then SARS will see you as a trader in shares for revenue like in forever.

Once you stop trading the share and hold it for 3 years then article 9C kicks in. You are no longer a trader.
That may be true regarding article 9c but my experience and conversations with other investors is that once categorized as a trader SARS very seldom let you off the hook and that you can revert to a investor category. Also in my discussions with them in 2008 when I sold a lot of my shares with the crash then notified me that they were going to treat me as a trader. In discussion with them I asked whether they would share my losses in those shares which I had not held for 3 years but bailed out to limit my losses and they were not prepared to come to the party - but they did not pursue the trader tag after the discussion, I also carried an assessed lost for about 4 years after that as well
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Orca

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Re: Selling your shares after 3 years.
« Reply #5 on: February 12, 2018, 10:07:20 pm »
Obviously SARS will not share your loss but I am not a total dumbo with tax and I have been reading tax for many years.
You, my friend will be a total a-hole if you let SARS tax you as revenue on securities held for 3 years. Section 9C always prevails and not even SARS can wish it away.
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Patrick

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Re: Selling your shares after 3 years.
« Reply #6 on: February 13, 2018, 09:42:10 am »
This is something I've wanted to do for quite some time. I'm wondering if there's a way to use the R40k every year, rather than every three.

If I buy shares monthly, how do I indicate that I'm selling the shares I bought over three years ago rather than the shares I bought last month?
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Orca

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Re: Selling your shares after 3 years.
« Reply #7 on: February 13, 2018, 10:00:43 am »
I can't find any info on selling shares that were bought monthly. If you use the FIFO method and buy for 10 years it would take reams of paperwork if you sell all at once.
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rjthomas

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Paying Tax After Selling Shares
« Reply #8 on: February 14, 2018, 10:10:50 pm »
I use Easy Equities as my broker. When selling shares, they deduct their fees and VAT. There's also " Securities transfer tax and administration" so my question is this. What other taxes do I have to pay SARS when I submit my personal income tax returns?
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gcr

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Re: Paying Tax After Selling Shares
« Reply #9 on: February 14, 2018, 11:40:25 pm »
Quote from: rjthomas on February 14, 2018, 10:10:50 pm
I use Easy Equities as my broker. When selling shares, they deduct their fees and VAT. There's also " Securities transfer tax and administration" so my question is this. What other taxes do I have to pay SARS when I submit my personal income tax returns?
CGT on the difference between base cost (share price plus brokerage and other charges) and selling price less costs - its a % but there is an exclusion which I think is R 40,000
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Orca

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Re: Selling your shares after 3 years.
« Reply #10 on: February 15, 2018, 10:04:37 am »
Do not include the costs of buying and selling shares. Use only the "Due By You" and "Due To You" amounts as this incorporates the costs.
If it was 1 Buy transaction and you sell all after 3 years then it is simple. Deduct the former from the latter to get your Gain/Loss.
Then choose CGT in efiling and enter the amount. The programme will deduct the R40k exclusion and place 33.33% of the remainder to your income and tax it at your margin.
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gcr

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Re: Selling your shares after 3 years.
« Reply #11 on: February 15, 2018, 01:58:07 pm »
Quote from: Orca on February 15, 2018, 10:04:37 am
Do not include the costs of buying and selling shares. Use only the "Due By You" and "Due To You" amounts as this incorporates the costs.
If it was 1 Buy transaction and you sell all after 3 years then it is simple. Deduct the former from the latter to get your Gain/Loss.
Then choose CGT in efiling and enter the amount. The programme will deduct the R40k exclusion and place 33.33% of the remainder to your income and tax it at your margin.
Ho hum - thought that's what I said but then I suppose we all like to express ourselves differently
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Orca

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Re: Selling your shares after 3 years.
« Reply #12 on: February 15, 2018, 08:31:10 pm »
Always make your posts on tax short and simple. No doubt some readers will now include costs in their calculations just because you mentioned them.  :frustrated:

Should you have been trading like in selling your stocks before the 3 year holding period or even churning them and are unsure how to calculate your tax however complicated then ask here and I will post a simple method.

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gcr

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Re: Selling your shares after 3 years.
« Reply #13 on: February 15, 2018, 09:13:29 pm »
Quote from: Orca on February 15, 2018, 08:31:10 pm
Always make your posts on tax short and simple. No doubt some readers will now include costs in their calculations just because you mentioned them.  :frustrated:

Should you have been trading like in selling your stocks before the 3 year holding period or even churning them and are unsure how to calculate your tax however complicated then ask here and I will post a simple method.
According to your answer one should be using the consideration value of the buy sell order, however you also refer to due by/to you which in both cases have costs added and/or subtracted - what's your point
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Orca

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Re: Selling your shares after 3 years.
« Reply #14 on: February 15, 2018, 10:07:34 pm »
What do you mean by "consideration value"? I have no idea of what you are saying but if you consider yourself as tax conversant then I will bow out from tax and you take over.
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