(1A)  Where a person disposes of an equity share in a company that constitutes a pre-valuation date asset and acquires another equity share in that company in terms of a substitutive share-for-share transaction,  for the purposes of determining the date of acquisition of that equity share and the expenditure in respect of the cost of acquisition of that equity share, that person must be treated as having-

(a)     disposed of that equity share at the time immediately before that substitutive share-for-share transaction, for an amount equal to the market value of that equity share at that time; and

(b)     immediately reacquired that equity share at that time at an expenditure equal to that market value-

(i)      less any capital gain, and

(ii)     increased by any capital loss,

that would have been determined had that equity share been disposed of at market value at that time, which expenditure must be treated as an amount of expenditure actually incurred at that time for the purposes of paragraph 20(1)(a) of the Eighth Schedule.

[Subsection (1A) added by section 92 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013 as substituted by section 124 of Act 43 of 2014]

(2)     Subject to subsection (4), where a person disposes of an equity share in a company and acquires another equity share in that company in terms of a substitutive share-for-share transaction, that person must be deemed to have-

(a)     disposed of that equity share so disposed of for an amount equal to the expenditure incurred by that person in respect of that equity share so disposed of which is or was allowable in terms of paragraph 20 of the Eighth Schedule or taken into account in terms of section 11(a) or 22(1) or (2), as the case may be;

(b)     acquired that other equity share so acquired on the latest date on which that person acquired any share comprising the equity share so disposed of for a cost equal to the expenditure incurred by that person as contemplated in paragraph (a); and

(c)     incurred the cost contemplated in paragraph (b) on the date contemplated in that paragraph, which cost must-

(i)      if the equity share so acquired is acquired as a capital asset, be treated for the purposes of paragraph 20 of the Eighth Schedule as an expenditure actually incurred by that person in respect of the equity share so acquired; or

(ii)     if the equity share so acquired is acquired as trading stock, be treated for the purposes of section 11(a) or 22(1) or (2) as the amount to be taken into account by that person in respect of the equity share so acquired.

[Subsection (2) amended by section 92(1)(i) of Act 31 of 2013 effective on 1 April 2013, substituted by section 92(1)(j) of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013, substituted by section 124 of Act 43 of 2014)]

(3)       ……….

[Subsection (3) deleted by section 90 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013, substituted by section 124 of Act 43 of 2014]

(4)

(a)     This subsection applies where-

(i)      a person disposes of an equity share in a company in terms of a substitutive share-for-share transaction; and

(ii)     that person becomes entitled, in exchange for that equity share, to any consideration other than a dividend, foreign dividend or another equity share that is acquired by that person in terms of that substitutive share-for-share transaction.

(b)     Where a person disposes of an equity share in terms of a substitutive share-for-share transaction and becomes entitled to consideration other than another equity share as contemplated in paragraph (a)(ii)-

(i)      subsection (2) must not apply to the part of the equity share so disposed of that relates to that consideration; and

[Subparagraph (i) substituted by section 56 of Act 43 of 2014 effective on 20 January 2015]

(ii)     either-

(aa)    where that equity share is so disposed of as a capital asset, the base cost at the time of that disposal of the part of the equity share contemplated in subparagraph (i) must be deemed to be equal to an amount which bears to the base cost of the equity share so disposed of the same ratio as the market value of that consideration bears to the sum of the market value of that consideration and the market value of the equity share acquired by that person in terms of that substitutive share-for-share transaction; or

(bb)   where that interest is so disposed of as trading stock, the amount to be taken into account in terms of section 11 (a) or 22(1) or (2) in respect of the part of the equity share contemplated in subparagraph (i) must be deemed to be equal to an amount which bears to the total amount taken into account in terms of section 11(a) or 22(1) or (2) in respect of the equity share so disposed of the same ratio as the market value of that consideration bears to the sum of the market value of that  consideration and the market value of the equity share acquired by that person in terms of that substitutive share-for-share transaction.

[Subsectiom (4) substituted by section 92 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013, substituted by section 124 of Act 43 of 2014]

(4A)  If an equity share is issued in terms of a substitutive share-for-share transaction, the issue price of the linked unit disposed of in terms of that transaction is deemed to be contributed tax capital in respect of the class to which the equity share so acquired relates.

[Subsection (4A) inserted by section 92 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013 as substituted by section 124 of Act 43 of 2014]