Cost When Depreciation Allowed

Section 75 — COST OF ACQUISITION = WDV WHERE DEPRECIATION ALLOWED

Section 75 is the substantive equivalent of 1961 s. 50A. It addresses the case where depreciation has been obtained under s. 33(2) (depreciation on capital asset used in scientific research / specified business) for a capital asset in any tax year. On subsequent transfer, the cost of acquisition for s. 72/73 computation is taken as the WRITTEN DOWN VALUE per s. 41 — adjusted as appropriate. This prevents double tax-benefit (depreciation allowed earlier + full cost-base on transfer).

STATUTORY ARCHITECTURE

The narrow scope: section 75 applies ONLY where depreciation was granted under s. 33(2) — i.e., for capital assets used in scientific research that, on cessation of research-use, are deployed in business and depreciated. On subsequent transfer of such asset, cost of acquisition for CG = WDV (per s. 41 definition) of the asset, AS ADJUSTED. This is distinct from s. 74 (block-of-assets STCG override) — s. 75 does NOT recharacterise LTCG as STCG; it merely substitutes the cost-base.

PLANNING NOTES

(i) For assets transferred from scientific-research to general business and subsequently sold, maintain WDV-tracking schedule from year of inclusion in business depreciation pool. (ii) Distinguish s. 75 (cost-base substitution) from s. 74 (STCG-classification) — they operate independently; both could apply to same asset. (iii) For research-asset gifts / inheritance / amalgamation transfers (s. 70 modes), s. 75 substitutes WDV as the cost-base inherited by transferee.

CROSS-REFERENCES

• Section 33(2) — Depreciation post-research-use.
• Section 41 — WDV definition.
• Section 72 / 73 — CG computation framework (modified by s. 75).
• Section 74 — Depreciable block STCG (separate operation).