Required: Advise the real property gains tax implication to both parties, if any, of the gift of property from Kelvin to Flora. Compute the chargeable gain arising from the disposal of the bungalow by Flora in year 2018. Suggest Flora how to minimise her exposure to real property gains tax, taking into account the holding period of the property and the effective tax rate which would apply when disposing a property
Kelvin is a Malaysian who had acquired condominium for RM550,000 on 14th January 2010 and incurred RM10,000 for stamp duty. Upon acquisition, he spent 38,000 on renovating the house.
On 10th January 2015, he decides to make the condominium as a Valentine gift to his wife, Flora. The market value of the condominium at that time was RM670,000. The property ownership was the transferred to her name on 14th February 2015 without written agreement.
In May 2015, Flora incurred a renovation of RM20,000 to derive a monthly rental income of RM2,000.
In June 2018, Flora agreed with an offer from the tenant to acquire the condominium. The tenant paid her a deposit of RM8,000 and proceeded to make an application for a bank loan. However, the tenant’s loan application was rejected and as per the verbal agreement, Flora forfeited the deposit. On 14th December 2018, Flora disposed the condominium for RM850,000.
Required:
- Advise the real property gains tax implication to both parties, if any, of the gift of property from Kelvin to Flora.
- Compute the chargeable gain arising from the disposal of the bungalow by Flora in year 2018.
- Suggest Flora how to minimise her exposure to real property gains tax, taking into account the holding period of the property and the effective tax rate which would apply when disposing a property
|
|
Real Property Gains Tax (RPGT) |
|
|
(1) RPGT Implications for the Gift of Property from Kelvin to Flora as per the Given Case. |
|
|
This part requires you to discuss the RPGT implications for disposing property as gift from the information given according to relevant case laws tax legislations. |
|
|
(2) Computation of Chargeable Gain Arising From the Disposal of Bungalow by Flora in Year of Assessment 2018. |
|
|
This part requires you to compute the chargeable gain from the information given according to relevant tax legislations pertaining to the RPGT. |
|
|
(3) Suggestions to Flora of the RPGT Exposure in Disposing a Property As Given In the Case. |
|
|
This part requires you to suggest to Flora of the RPGT exposure in disposing a property from the information given according to relevant case laws tax legislations. The focus is to derive ways on how to minimise her exposure to RPGT, taking into account the holding period of the property and the effective tax rate which would apply when disposing a property. |
Step by step
Solved in 2 steps
