With the advent of CGT it is important to under-stand the fundamental principles involved. One of the most important principles of CGT is the base cost of any capital item. The capital gain or loss of an asset is determined by deducting the base cost of the asset from the proceeds in respect of the disposal of such asset. Accordingly, the understanding of what constitutes base cost is vital. In order to give an o v e review of the elements of base cost, the following guidelines should assist you. Please note that these guidelines are merely an o v e review and that when acting upon the information contained in this article, we recommend that professional advice be sought.

Direct costs of acquisition and disposal

It is proposed that the following amounts actually incurred form part of base cost:

	Cost of acquisition
	Cost of creating an asset
	Cost of obtaining a valuation for CGT purposes
	Remuneration of a survey or valuer, auctioneer, accountant, broker, agent, consultant or legal advisor
	Transfer costs
	Stamp duty, transfer duty or similar duty
	Advertising costs to find a buyer or seller
	Moving costs relating to the acquisition or disposition of an asset
	Installation costs
	Where any of the costs include value added tax, where an input credit for VAT has not been allowed, then such VAT may be included in the base cost of an asset
	Prorata portion of donations tax payable by a donor of an asset
	A prorata portion of donations tax payable by a donee of an asset (where a donor has failed to pay the donations tax, the donee could become liable for the donations tax)
	Cost of exercising an option to acquire an asset

This article has been condensed, to read the rest of this article please see the Nolands June / July 2001 Newsletter.

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