Business Law Assignment: Income Tax and Business Transactions Analysis

This business law assignment analyzes the tax implications of various business transactions, including mergers and acquisitions, asset sales, and shareholder dividends. The solution addresses key aspects such as the cost of asset acquisition and its impact on future capital gains, the taxation of revaluation gains and losses, and the tax treatment of asset sales under the Income Tax Act. It also covers the tax implications of dividend distributions and loan repayments. Furthermore, the assignment examines scenarios where transactions might be tax-neutral and the varying tax rates applicable to capital gains based on the nature of the asset. Finally, it discusses the transfer of net operating losses and tax credits in the context of a merger or amalgamation, providing practical insights into tax planning within business operations.

Running head: BUSINESS LAW
Business Law
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Answer to question 1..................................................................................................................3
Answer to question two..............................................................................................................3
Answer to question three............................................................................................................4
Answer to question four.............................................................................................................4
Reference....................................................................................................................................5

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Answer to question 1.
In case the of the assets that are being acquired by Company A from Company B due
to the merger and acquisitions between them, the amount that is being spent on the
acquisition fo the assets of the company will be treated as cost of acquisition for future capital
gains in case the company decides to sell the same in the near future. In addition to this if, the
company conducts the revaluation of the assets of the company B and for the same the
company is able to avail some income or profit, then the same will be taxable for the
company (Fine, 2015). On the other had if the company faces some revaluation loss the same
will be deductible from the net income of the company and deduction for the same can be
availed by the company for tax purposes.
Answer to question two.
In this case, one of the companies are selling its assets to another company. The selling of
business assets to another company will be subject to tax under Income Tax Act. The tax on
capital gains is required to be paid on the amount that will be received from sale of business
assets after deducting the base cost of the assets. In this case it is assumed that there are no
other expenses related to disposal of assets. The capital gain from the sale of the assets shall
be included in the taxable income. The applicable tax rate for capital gain is 28%. The
proceeds amount from the sale of asset that is distributed to the shareholder shall be regarded
as dividend. The distribution will be subject to 15% dividend tax. You there is any repayment
of loan outstanding amount it will have no consequences related to tax.
Answer to question three.
In case the proceeds that is being received by the shareholders of the company is able to
be qualified under the provisions of the section 42 to 47 of the income tax act then the entire
transaction will be tax neutral (Brewer et al. 2016). In case the asset had been held for capital

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account that is solely for the purpose of investment, capita gain tax will be liveable at a rate
of 22.4% on the taxable gain because of sale. If the asset had been held for the purpose of,
trading ta would have been levied at a rate of 28%.
Answer to question four.
The net operating losses that had been incurred over the period of operations by company B
along with the tax credits had to be transferred to company A due to the merger or
amalgamation of the two companies (Inchauste et al., 2015). The net operating losses can be
deducted from the income earned from the operations of the present year by company and the
tax credit will also be available with company A for deduction in the amount fo tax to be
paid.

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Reference
Brewer, J. D., Wilford, R., Guelke, A., Hume, I., & Moxon-Browne, E. (2016). The police,
public order and the state: policing in Great Britain, Northern Ireland, the Irish
Republic, the USA, Israel, South Africa and China. Springer.
Fine, B. (2018). The political economy of South Africa: From minerals-energy complex to
industrialisation. Routledge.
Inchauste, G., Lustig, N., Maboshe, M., Purfield, C., & Woolard, I. (2015). The distributional
impact of fiscal policy in South Africa. The Distributional Impact of Taxes and
Transfers, 233.
McCluskey, W. J., & Franzsen, R. C. (2017). Land value taxation: An applied analysis.
Routledge.