Wealth Statement

[Information Consultant]

Dear Forum Member

Can we show the effect of Loss or Gain on Sale of vehicle in wealth statement ?

[sharif lakhani]

logically yes, gain will increase your wealth. should be part of wealth reconciliation also.just my input though am not taxpert.
sL

[LapTop]

No.

[Information Consultant]

ok laptop

it means if we have a vehicle mention in our wealth 2010 cost rs 950000 and sold it Rs 800000 and buy a new one Rs 1100000 .
We will mention in our wealth 2011 value of new vehicle .Am i right ?

[Information Consultant]

should loss or gain is a part of reconcilation?

[sharif lakhani]

the loss/gain after depreciating car? there is official table with official rates of dep.???

[sahibzada]

Its impact goes to cash, make cash reconciliation and then show that amount in wealth statement.

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Information Consultant</i>
<br />

it means if we have a vehicle mention in our wealth 2010 cost rs 950000 and sold it Rs 800000 and buy a new one Rs 1100000 .
We will mention in our wealth 2011 value of new vehicle .Am i right ?

should loss or gain is a part of reconcilation?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Loss or gain must be part of reconciliation statement. Reconciliation without showing capital gain or loss shows that wealth statement does not reflect the right position.

For example considering your above example. Mr. A has only car of Rs. 950 thousands in his wealth statement of Tax year 2010. He has no other asset in 2010.

As said by you, during 2011 he sold that car for Rs.800 thousand (i.e. at capital loss of 150 thousand rupees) Then he purchased another car of Rs.1100 thousand. It means that he must have invested extra 300 thousand to purchase vehicle of Rs.1100 thousand. Suppose again his only asset in Tax Year 2011 is car costing Rs.950 thousand and nothing else to show in wealth.

Suppose his personal expenses (including taxes, donations etc.)are 300,000. It has already been supposed that he has no asset other than car in wealth statement 2010 & 2011. It means that he would have zero balance of cash in hand as well as at bank in wealth statements for both the years.

Now prepare his cash account

Cash as on 30.06. 2010 0
Income during tax year 2011 600,000
<u>Add</u> sale proceeds of car 800000
<u>Less</u> Personal expenses 300,000
<u>Less</u> Purchase of car 1100000

Balance of Cash as on 30.06.2011 <b>zero </b>

Coming to Wealth Reconciliation statement.

Available data is

Wealth as on 30.06. 2010 [one car only] Rs.950,000
Wealth as on 30.06.2011 [one car only] Rs.11,00,000
Income for tax year 2011 Rs.600,000
Personal Expenses Rs.300,000

Column 3 of reconciliation statement should be equal to column 6 thereof

In other words

Wealth as on 30.06.2011 - Wealth as on 30.06.2010 = income - Expense

Substituting values from available data

1100000 - 950,000 = 600,000 - 300,000
150,000 = 300,000 [Equation is wrong. so the wealth reconciliation does not reconcile. Difference between wealth is not equal to income - expense]

To reconcile the wealth you must take into account loss on sale of car i.e. 150,000

11,00,000 - 950,000 = 600,000 - 300,000 - 150,000

150,000 = 150,000 [Now it reconciles. If there is capital loss it will be added to expenses, if there is capital gain it will be added to income, in the Wealth Reconciliation Statement]

[Information Consultant]

Thank u very much

[amerrafique]

Assalam o Alaikum
Your reply was very comprehensive student of law and was based on the assumption that the car was not used for the purpose of business hence no deduction under section 22 is permissible. so any difference between the selling and the buying price is capital loss. if u could further explain the following scenario
should this loss of 150 thousand be reflected at s.no. 19 of the income tax return and a set off of this loss against income under any other head be worked out (section 56) and the taxable income be shown 450 thousand (600000-150000) or the taxable income will be 600000 as explained by you and this loss will become a part of wealth reconciliation.
Regards

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by amerrafique</i>
<br />Assalam o Alaikum
Your reply was very comprehensive student of law and was based on the assumption that the car was not used for the purpose of business hence no deduction under section 22 is permissible. so any difference between the selling and the buying price is capital loss. if u could further explain the following scenario
should this loss of 150 thousand be reflected at s.no. 19 of the income tax return and a set off of this loss against income under any other head be worked out (section 56) and the taxable income be shown 450 thousand (600000-150000) or the taxable income will be 600000 as explained by you and this loss will become a part of wealth reconciliation.
Regards
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Loss on disposal of asset is deductible only against the gain on disposal of asset and not otherwise. Relevant section is 59 that says "Where a person sustains a loss for a tax year under the head #8213;Capital Gains(hereinafter referred to as a #8213;capital loss, the loss shall not be set off against the person‘s income, if any, chargeable under any other head of income for the year, but shall be carried forward to the next tax year and set off against the capital gain, if any, chargeable under the head #8213;Capital Gains#8214; for that year."

Loss on capital asset does not affect any other head.

If we read s.38, we find another limitation. If you are calculating taxable capital gain then such gain would not be reduced by loss on disposal of an asset where gain on that asset is not taxable.

Whether gain on sale of car is taxable or not in view of s.37(5)(d) <i>[held for personal use</i>], is another issue. On this matter I have expressed my views at the following link however, further research is needed.

http//www.accountancy.com.pk/forum/topic.asp?topic_id=26515