Wazua
»
Investor
»
Stocks
»
Madness at the NSE
Rank: Veteran Joined: 3/26/2012 Posts: 985 Location: Dar es salaam,Tanzania
|
murchr wrote:sparkly wrote:murchr wrote:Quick question, Do you think that CGT will slow down selling hence making the price of some entities to go up? Prices are determined by demand and supply. If CGT kills supply, prices go up. If it kills demand, prices collapse. We might have the latter, IMO. I tend to think people will hold. Liquidity will be costly I like your thinking Murchr,That is a possibility
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”
|
|
|
Rank: Member Joined: 1/25/2010 Posts: 344
|
i totally disagree with the theory that people are selling stocks pre-CGT and buy them back post-CGT. doesn't make economic sense.
say u bought 10,000 shares of stock X at 50/=, current price is 100/=. if you sell that stock pre-CGT, cost incurred (brokerage fee) is say 2% of the revenue which is 10,000*100*0.02=10,000/=. If you decide to buy back the same shares post=CGT, you'll incur another 2% cost of brokerage of 10,000/=. total cost 20,000/=.
the other scenario is holding onto the shares and selling them post-CGT. costs incurred in this case will be the 10,000/= brokerage fee,plus 5% CGT. profit will be (10,000*100/=)minus(10,000*50/=)=50,000/= less brokerage fee of 10,000/=,net profit of 40,000/=.CGT will be 0.05*40,000=2,000/=. total cost incurred 12,000/= compared to 20,000/= above. also please note that i have not deducted the brokerage fee for buying the shares which should further reduce the taxable profit
#my2cents
|
|
|
Rank: Veteran Joined: 2/10/2010 Posts: 1,001 Location: River Road
|
theking wrote:i totally disagree with the theory that people are selling stocks pre-CGT and buy them back post-CGT. doesn't make economic sense.
say u bought 10,000 shares of stock X at 50/=, current price is 100/=. if you sell that stock pre-CGT, cost incurred (brokerage fee) is say 2% of the revenue which is 10,000*100*0.02=10,000/=. If you decide to buy back the same shares post=CGT, you'll incur another 2% cost of brokerage of 10,000/=. total cost 20,000/=.
the other scenario is holding onto the shares and selling them post-CGT. costs incurred in this case will be the 10,000/= brokerage fee,plus 5% CGT. profit will be (10,000*100/=)minus(10,000*50/=)=50,000/= less brokerage fee of 10,000/=,net profit of 40,000/=.CGT will be 0.05*40,000=2,000/=. total cost incurred 12,000/= compared to 20,000/= above. also please note that i have not deducted the brokerage fee for buying the shares which should further reduce the taxable profit
#my2cents The theory is that if you bought your shares in the 1990's when they were dirt cheap CGT uses the year of purchase as the base year to calculate the 5% capital gains. It is much easier to sell and buy back to make 2014 your base year for CGT
|
|
|
Rank: Member Joined: 1/25/2010 Posts: 344
|
mkonomtupu wrote:theking wrote:i totally disagree with the theory that people are selling stocks pre-CGT and buy them back post-CGT. doesn't make economic sense.
say u bought 10,000 shares of stock X at 50/=, current price is 100/=. if you sell that stock pre-CGT, cost incurred (brokerage fee) is say 2% of the revenue which is 10,000*100*0.02=10,000/=. If you decide to buy back the same shares post=CGT, you'll incur another 2% cost of brokerage of 10,000/=. total cost 20,000/=.
the other scenario is holding onto the shares and selling them post-CGT. costs incurred in this case will be the 10,000/= brokerage fee,plus 5% CGT. profit will be (10,000*100/=)minus(10,000*50/=)=50,000/= less brokerage fee of 10,000/=,net profit of 40,000/=.CGT will be 0.05*40,000=2,000/=. total cost incurred 12,000/= compared to 20,000/= above. also please note that i have not deducted the brokerage fee for buying the shares which should further reduce the taxable profit
#my2cents The theory is that if you bought your shares in the 1990's when they were dirt cheap CGT uses the year of purchase as the base year to calculate the 5% capital gains. It is much easier to sell and buy back to make 2014 your base year for CGT it'll still be more expensive to sell and buy back even if the shares were free. do the math
|
|
|
Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
|
theking wrote:mkonomtupu wrote:theking wrote:i totally disagree with the theory that people are selling stocks pre-CGT and buy them back post-CGT. doesn't make economic sense.
say u bought 10,000 shares of stock X at 50/=, current price is 100/=. if you sell that stock pre-CGT, cost incurred (brokerage fee) is say 2% of the revenue which is 10,000*100*0.02=10,000/=. If you decide to buy back the same shares post=CGT, you'll incur another 2% cost of brokerage of 10,000/=. total cost 20,000/=.
the other scenario is holding onto the shares and selling them post-CGT. costs incurred in this case will be the 10,000/= brokerage fee,plus 5% CGT. profit will be (10,000*100/=)minus(10,000*50/=)=50,000/= less brokerage fee of 10,000/=,net profit of 40,000/=.CGT will be 0.05*40,000=2,000/=. total cost incurred 12,000/= compared to 20,000/= above. also please note that i have not deducted the brokerage fee for buying the shares which should further reduce the taxable profit
#my2cents The theory is that if you bought your shares in the 1990's when they were dirt cheap CGT uses the year of purchase as the base year to calculate the 5% capital gains. It is much easier to sell and buy back to make 2014 your base year for CGT it'll still be more expensive to sell and buy back even if the shares were free. do the math Sell to another company that you own. The second company will still be able to deduct brokerage paid. Bear in mind that CGT applies for longterm purchases. Life is short. Live passionately.
|
|
|
Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
|
theking wrote:i totally disagree with the theory that people are selling stocks pre-CGT and buy them back post-CGT. doesn't make economic sense.
say u bought 10,000 shares of stock X at 50/=, current price is 100/=. if you sell that stock pre-CGT, cost incurred (brokerage fee) is say 2% of the revenue which is 10,000*100*0.02=10,000/=. If you decide to buy back the same shares post=CGT, you'll incur another 2% cost of brokerage of 10,000/=. total cost 20,000/=.
the other scenario is holding onto the shares and selling them post-CGT. costs incurred in this case will be the 10,000/= brokerage fee,plus 5% CGT. profit will be (10,000*100/=)minus(10,000*50/=)=50,000/= less brokerage fee of 10,000/=,net profit of 40,000/=.CGT will be 0.05*40,000=2,000/=. total cost incurred 12,000/= compared to 20,000/= above. also please note that i have not deducted the brokerage fee for buying the shares which should further reduce the taxable profit
#my2cents Think simple. If you sell pre CGT, CGT=0. If you sell post CGT, CGT= 25,000. Brokerage paid is a recoverable cost while CGT isn't. Life is short. Live passionately.
|
|
|
Rank: Veteran Joined: 6/23/2011 Posts: 1,740 Location: Nairobi
|
I totally agree with you.
When one sells to avoid CGT the implication is that they can tell what will happen to the share in 2015 i.e. become cheaper. In which case you sell any way and buy in 2015.
CGT is just an excuse and simplicity in analysis in the selling behaviour.
One needs to compare what happens each end of year and then a trend may appear
|
|
|
Rank: Member Joined: 1/25/2010 Posts: 344
|
sparkly wrote:theking wrote:i totally disagree with the theory that people are selling stocks pre-CGT and buy them back post-CGT. doesn't make economic sense.
say u bought 10,000 shares of stock X at 50/=, current price is 100/=. if you sell that stock pre-CGT, cost incurred (brokerage fee) is say 2% of the revenue which is 10,000*100*0.02=10,000/=. If you decide to buy back the same shares post=CGT, you'll incur another 2% cost of brokerage of 10,000/=. total cost 20,000/=.
the other scenario is holding onto the shares and selling them post-CGT. costs incurred in this case will be the 10,000/= brokerage fee,plus 5% CGT. profit will be (10,000*100/=)minus(10,000*50/=)=50,000/= less brokerage fee of 10,000/=,net profit of 40,000/=.CGT will be 0.05*40,000=2,000/=. total cost incurred 12,000/= compared to 20,000/= above. also please note that i have not deducted the brokerage fee for buying the shares which should further reduce the taxable profit
#my2cents Think simple. If you sell pre CGT, CGT=0. If you sell post CGT, CGT= 25,000. Brokerage paid is a recoverable cost while CGT isn't. my point is not selling, my point is selling to buy back, doesn't make economic sense even if BP is 0
|
|
|
Rank: Member Joined: 6/14/2010 Posts: 521 Location: Nairobi
|
theking wrote:mkonomtupu wrote:theking wrote:i totally disagree with the theory that people are selling stocks pre-CGT and buy them back post-CGT. doesn't make economic sense.
say u bought 10,000 shares of stock X at 50/=, current price is 100/=. if you sell that stock pre-CGT, cost incurred (brokerage fee) is say 2% of the revenue which is 10,000*100*0.02=10,000/=. If you decide to buy back the same shares post=CGT, you'll incur another 2% cost of brokerage of 10,000/=. total cost 20,000/=.
the other scenario is holding onto the shares and selling them post-CGT. costs incurred in this case will be the 10,000/= brokerage fee,plus 5% CGT. profit will be (10,000*100/=)minus(10,000*50/=)=50,000/= less brokerage fee of 10,000/=,net profit of 40,000/=.CGT will be 0.05*40,000=2,000/=. total cost incurred 12,000/= compared to 20,000/= above. also please note that i have not deducted the brokerage fee for buying the shares which should further reduce the taxable profit
#my2cents The theory is that if you bought your shares in the 1990's when they were dirt cheap CGT uses the year of purchase as the base year to calculate the 5% capital gains. It is much easier to sell and buy back to make 2014 your base year for CGT it'll still be more expensive to sell and buy back even if the shares were free. do the math I think MkonoMtupu's theory makes sense. If I bought shares back in the 90s at those rock bottom prices, I'd simply sell and buy back pre-CGT.
|
|
|
Rank: Elder Joined: 7/22/2009 Posts: 7,836
|
The optimist wrote:theking wrote:mkonomtupu wrote:theking wrote:i totally disagree with the theory that people are selling stocks pre-CGT and buy them back post-CGT. doesn't make economic sense.
say u bought 10,000 shares of stock X at 50/=, current price is 100/=. if you sell that stock pre-CGT, cost incurred (brokerage fee) is say 2% of the revenue which is 10,000*100*0.02=10,000/=. If you decide to buy back the same shares post=CGT, you'll incur another 2% cost of brokerage of 10,000/=. total cost 20,000/=.
the other scenario is holding onto the shares and selling them post-CGT. costs incurred in this case will be the 10,000/= brokerage fee,plus 5% CGT. profit will be (10,000*100/=)minus(10,000*50/=)=50,000/= less brokerage fee of 10,000/=,net profit of 40,000/=.CGT will be 0.05*40,000=2,000/=. total cost incurred 12,000/= compared to 20,000/= above. also please note that i have not deducted the brokerage fee for buying the shares which should further reduce the taxable profit
#my2cents The theory is that if you bought your shares in the 1990's when they were dirt cheap CGT uses the year of purchase as the base year to calculate the 5% capital gains. It is much easier to sell and buy back to make 2014 your base year for CGT it'll still be more expensive to sell and buy back even if the shares were free. do the math I think MkonoMtupu's theory makes sense. If I bought shares back in the 90s at those rock bottom prices, I'd simply sell and buy back pre-CGT. Is the CGT being back dated? I doubt! How do you tax gains that were made before the tax was operational. That would not make sense and would be grounds for numerous court cases. But this is Kenya. anything is possible and people in certain offices are bloody lazy!!! Have they decided on the base year in any case? Last I heard, brokers were saying they didn't have records on when shares were bought and at how much! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
|
|
|
Wazua
»
Investor
»
Stocks
»
Madness at the NSE
Forum Jump
You cannot post new topics in this forum.
You cannot reply to topics in this forum.
You cannot delete your posts in this forum.
You cannot edit your posts in this forum.
You cannot create polls in this forum.
You cannot vote in polls in this forum.
|