FAQ: How must the base cost of my demutualisation shares be determined?

The valuation date value of demutualisation shares in Old Mutual and Sanlam can be determined by using any of the four methods available for this purpose, namely, market value, time-apportionment, 20% of proceeds or weighted average. However, since these shares were acquired for an expenditure of nil, the time-apportionment method is unlikely to give the best result, particularly as the number of years after valuation date increases.
The other methods for determining the valuation date value should therefore also be considered. Since these shares were listed on the JSE, the market values published by SARS on this website and in Government Gazette 23037 of 25 January 2002 must be used to determine the valuation date value for shares held on 1 October 2001 when applying the market value or weighted average method (Sanlam R8,89 per share; Old Mutual R13,63 per share).

A taxpayer received 1 000 demutualisation shares in 1998. The volume weighted average price for the five business days before valuation date was R10 per share. The shares were sold in 2017 for R18 000.

Proceeds               R18 000
Less: Base cost    (R10 000)
Capital gain          R   8 000 ​

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