Untitled Flashcards Set

Adjusted Cost Base

The adjusted cost base of an asset is defined as the original cost base of the asset adjusted by specific factors. It is reduced by any depreciation or amortization allowance and by any refund or reimbursement, such as one arising from a defect in the asset. Conversely, the adjusted cost base is increased by the cost of improvements (but not repairs) to the asset and by any other capital costs associated with the asset. This includes non-deductible costs involved in acquiring, holding, or disposing of the asset, such as fees, commissions to valuers or brokers, legal advisers, advertising costs, and transfer costs including stamp duty.

Business Definition

Business is broadly defined to encompass any trade, profession, or vocation. Specifically, the provision of services, excluding those conducted under an employment relationship, is treated as a business for the purposes of the Act. The inclusive definition of business is intended to align with the substantial body of judicial decisions from the United Kingdom and the Republic of South Africa that clarify the meaning of "business." While there are no strict legal rules defining business, several factors have emerged from judicial decisions that can help determine whether a taxpayer's activities qualify as a business. These factors include profit motive, the scale of activity, repetition and continuity of activity, commercial character, and system and organization. However, it has been emphasized that the presence or absence of any one factor is not determinative. For instance, while the repetition of activity is an important indicator, an isolated activity may still be deemed a business when certain conditions are met. The term "adventure" includes an isolated transaction that has a business character, further ensuring that activities in the nature of trade are recognized as businesses under the Act.