Q.
b) Adi Putra purchased a parcel of agricultural land encompassing an area of one (1) acre on 1 Jun, 2009 at RM100,000. He submitted an application for conversion to change the category of land use to building and paid an additional land premium of RM70,000. Adi Putra obtained planning permission to subdivide his lot into four (4) lots measuring 10,000 square feet each. He sold two (2) lots to his sons Daniel and Darry at a price of RM100,000 each, one (1) to his wife Aminah for love and affection and the other lot to his business partner, Mr Salim for RM250,000. All the transactions were made on 1 February, 2011. Market value for bungalow plot in the vicinity is at RM25 per square foot.
(15 marks, 2011 Q2b)
A.
Original Question and Answers here.
(05.07.2016 correction alerted by Angie Ng)
In his disposal, Adi Putra (hereafter Adi) subdivided the land into 4 parts.
Three parts were transferred to his close relatives - Wife and 2 sons.
Only 1 part was transferred to outsider - his friend Salim. Adi in fact has only the part transferred to his friend Salim under the usual RPGT calculation. The other 3 parts were under 'No gain no loss' transaction.
For transaction between close relatives, according to s.80 Stamp Act 1949, Minister of Finance is empowered to exempt Stamp Duty at 50% for transact between father and son and full 100% exemption between spouse. For Daniel and Darry and Salim, Stamp Duty is calculated at 50% and for Aminah, it is Zero stamp duty.
Stamp Duty
The value for calculation of Stamp Duty is Consideration Received or Market Value, whichever is greater.
RM25 per sq ft was the market value. Hence, 10,000 sq ft x 25 = RM250,000.
Purchaser are to pay the stamp duty. Thus, for the sake of illustration.
Salim
100,000 + 150,000 = 250,000.
--- 1% -------2% ----
RM1,000 + RM3,000 = RM4,000
Daniel and Darry RM4,000/2 = RM2,000 each.
Spouse - Aminah = 0 duty (Full exemption, Stamp Duty (Exemption) (No.10) Order 2007 PU(A) 420/2007.
Stamp Duty Exemptions:
Instruments in connection with the transfer of immovable property operating as a voluntary disposition between husband and wife — effective 8 September 2007.
Ref:
http://www.mia.org.my/v1/downloads/resources/publications/budget/2017/C/C2.pdf
Ref:
http://www.jcw.com.my/practice4.asp
Real Property Gains Tax
Exemption for RPGT are: (refer earlier post RPGT Exemptions here)
Sch 2 Para 3 - devolution, transfer between spouses,
Sch 2 Para 12 - transfer as gift between husband and wife, parent to children, grandparent to grandchildren,
Disposal Price equals to Acquisition Price, arriving at 'no gain no loss'.
Therefore, for the parts of Daniel, Darry and Aminah, they are considered 'no gain no loss'. Thus, disposal price - acquisition price.
The Acquisition price (1 Jun 2009) = RM100,000
Equally divided into 4 parts = RM25,000 per part.
For Aminah - Wife
Original cost per part (1 Feb, 2011) = RM25,000
Add: Premium in conversion RM70,000/4 = RM17,500
Disposal price = RM42,500.
RPGT = no gain no loss, Sch 2 Para 3 Transfer between spouse.
For Daniel & Darry - Sons
Original cost per part (1 Feb, 2011) = RM25,000
Add: Premium in conversion RM70,000/4 = RM17,500
Acquisition price (added with premium on conversion) = 42,500.
Disposal price = Consideration received RM100,000
If elect to exempt with Sch 2 Para 12 - Gift between parent and children, the transaction is 'no gain no loss', disposal price = acquisition price. No RPGT gain.
The difference RM100,000 - RM42,500 = RM57,500 is taken as gift of money from Son to Father. There is no significant of this on RPGT, however in due time when the sons sell the property, the acquisition price is RM42,500 and NOT RM100,000.
For Salim - friend and at arm's length
Original cost per part (1 Feb, 2011) = RM25,000
Add: Premium in conversion RM70,000/4 = RM17,500
Consideration received = RM250,000
Less
Acquisition price (added with premium on conversion) = RM42,500
Chargeable Gain = RM207,500.
Less Sch 4 Exemption (10% or 10,000 whichever greater) - RM20,750
Less RPGT loss carried forward, if any
Gain ----------------------------------------------------------------RM186,750
Tax RPGT payable (01.06.2009 - 01.02.2011 = within 2 years) @ 10% = RM18,675.
Ref:
Earlier posts.
2011 D04 Q2