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FAQ: Can an assessed loss – as opposed to an assessed capital loss – be set off against a taxable capital gain?

Yes. Some commentators have questioned this point because a taxable capital gain is included in taxable income. The definition of the term “taxable income” in section 1 provides as follows:

“taxable income” means the aggregate of—
(a) the amount remaining after deducting from the income of any person all the amounts allowed under Part I of Chapter II to be deducted from or set off against such income; and
(b) all amounts to be included or deemed to be included in the taxable income of any person in terms of this Act;

It is evident from this definition that taxable income can be a negative figure. Paragraph (a) would become negative when the amounts allowed under Part I of Chapter II exceed the income of a person. Furthermore, Part I of Chapter II includes section 20 which deals with assessed losses.

The intention of the legislature can also be seen from the amendments to section 103(2) which provides that a ‘tainted’ capital gain cannot be set off against an assessed loss. These amendments would not have been necessary if a taxable capital gain could not be set off against an assessed loss.​

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