QUESTION 3 (RPGT CHAPTER)

Khairi transfered a 6 acre land to his wife Dilla for RM300,000 on 26 July 2015. Khairi incurred RM20,000 on land improvement. The market value of the house at the time of transfer was RM410,000. Khairi bought the land on 18 February 2014 for RM180,000. He incurred stamp duty of RM3,000 in connection with the purchase.

Dilla disposed the land on 23 October 2019 for RM620,000. Prior to disposal of the land, she incurred capital expenditure amounting of RM50,000 in order to enhance the value of the land. She also incurred RM5,000 on legal fees to defend the title of the land.

Required:

(i) State the RPGT position of Khairi on the disposal of his land to his wife, Dilla.  (5 marks)

(ii) Compute the RPGT payable by Dilla on the disposal of the land in October 2019. (8 marks)

The transactions occurred as follows:

18 Feb 2014:The Land purchased by Khairi cost RM 180000

18 Feb 2014: Stamp Duty of RM 3000 incurred by Khairi for the purchase, also Khairi incurs RM 20000 on land improvement

26 July 2015: Khairi transferred the land to Dilla for RM 300000

i)RPGT Position of Khairi

The Malaysian laws allows one time exemption on RPGT for transfer of land between husband and wife.

So, maybe Khairi can get the exemption form paying Real Property Gains Tax on transfer of land to his wife Dilla.

ii) Computing the RPGT Payable by Dilla on disposal

Dilla acquires the land for an amount of RM 300000

Price at which Dilla disposed the land = RM 620000

Therefore, Gross amount chargable for RPGT = 620000 - 300000 = RM 320000

Malaysian laws only allows an exemption on RPGT equal to an amount of 10% of the profit = 10% of 320000 = 32000

Other Allowable Expenses available to Dilla for deduction from the gross chargable amount for RPGT

(i) Capital Expenditure to enhance the value of land = RM 50000   

(ii) Legal Fees to defend the title of the land = RM 5000

So,

Net amount that can be charged for calculation of RPGT = Gross Amount - Exemption - Allowable Expenses

= 320000 - 32000 - 50000 - 5000

= RM 233000

The Rate applicable for RPGT payable by Dilla = 15% because the property is being disposed off in the 5th year

NOTE: In the question, the RPGT rate slabs have not been mentioned, but according to the RPGT laws in Malaysia, the rate applicable for disposing off a property in the 5th year is 15%.

Therefore,

RPGT Payable by Dilla = 233000 * 15% = RM 34950 [THE ANSWER]