Answered: Part CJohn Peter is aware that there is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Part C
John Peter is aware that there is no Capital Gains tax in Jamaica. He decided to buy a large piece
of land. The land was hilly, so he blasted it to make it flatter, installed a soak away so the water
does not settle on the land and made several roadways for ease of access. Six months after he
purchased the land, he subdivided the area and sold it in lots to 30 separate persons, thereby
making a large gain.
Required
Advise Mr. Peter how these gains would be treated for tax purposes in Jamaica. Appropriate case
laws should be included in your answer.

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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