Commissioner for the SA Revenue Service v Catherine Marcia Wyner

The respondent (Wyner) leased property (Erf 484, Clifton) from the City of Cape Town Council from 1973 as a monthly tenant. She had rebuilt the bungalow and made improvements to the property during the lease, at a cost of approximately R90,000. In 1994, the Council offered to sell Clifton bungalow sites to existing lessees at market value. The property was offered to Wyner for R802,000, though its market value was conservatively assessed at R2,550,000. Wyner did not have funds to purchase the property. Investec Bank provided bridging finance of R1,030,000 for 12 months, with the understanding that Wyner would purchase the property with a view to selling it within a year. Wyner purchased the property on 29 August 1994 for R802,000 and sold it on 4 September 1995 for R2,850,000, realizing a profit of R1,530,947. She used the proceeds to repay Investec, purchase another cheaper property in Clifton, and invest the balance. The Receiver of Revenue sought to tax the profit at R701,132.96.

• Whether the profit from the sale of immovable property was of a capital or revenue nature
• Whether the taxpayer's acquisition and sale of the property constituted a scheme of profit-making
• Whether the taxpayer's prior status as lessee and the circumstances of the discounted offer affected the characterization of the profit
• The relevance of the taxpayer's intention at the time of acquisition and at the time of sale

The appeal was upheld with costs, including costs for two counsel. The assessment issued by the Commissioner for the 1996 year of assessment was confirmed, meaning the profit of R1,530,947 was included in the respondent's gross income and subject to tax.

The acquisition of property with the fixed intention of reselling it at a profit within a defined period, even if it is a single isolated transaction, constitutes a scheme of profit-making, and the profit derived is of a revenue nature and taxable as income. The taxpayer's intention at the time of acquisition is of great and sometimes decisive importance in determining whether proceeds are capital or revenue. Where a taxpayer purchases an asset specifically for the purpose of reselling it at a profit, the asset constitutes floating capital or stock-in-trade, and the profit represents the productive turn-over of capital and falls into the category of income. The fact that an opportunity to acquire property at below market value was fortuitous does not render the subsequent profit on resale non-taxable where the taxpayer designedly devised and executed a scheme to exploit that opportunity for profit. A lessee's prior occupation of property and improvements made during the lease do not create a sui generis ownership-like interest that would convert profit on purchase and resale into a capital receipt.

The Court made observations distinguishing this case from inheritance cases, noting that the characterization of inherited property as capital does not automatically extend to situations where property is acquired through purchase, even at a discount. The Court also observed that the eventual use of proceeds (such as purchasing another residence) does not alter the revenue nature of the original transaction; each subsequent transaction must be assessed separately based on the intention with which that property was acquired. The Court noted that if Wyner had been the actual owner of the property prior to the Council's offer and had sold it, the proceeds would likely have been of a capital nature, but this was not the factual situation. The judgment also contains general observations about the need to examine all particular facts of each case when determining whether a transaction involves realization of a capital asset or a profit-making scheme.

This case clarifies the application of the distinction between capital and revenue receipts in South African tax law, particularly in the context of single transactions involving immovable property. It confirms that even a single, isolated transaction of purchasing property with the intention of reselling it at a profit will constitute a scheme of profit-making, making the proceeds taxable as revenue. The case emphasizes that the juristic nature of transactions must be analyzed, not notional or equitable interests. It demonstrates that fortuitous opportunities (like discounted offers) do not necessarily result in capital receipts if the taxpayer designedly exploits the opportunity through a profit-making scheme. The case also illustrates the importance of contemporaneous documentary evidence (such as bank proposals) in determining taxpayer intention, and that such evidence may override subsequent testimony. The decision reinforces that prior occupation or improvements to leased property do not create ownership-like interests that would convert profit on purchase and resale into capital receipts.