Section 42(5) contains an anti-avoidance rule preventing assets that are predominately trading stock and/or depreciable assets being disposed of in exchange for shares in a company, only for those shares to then be sold (within 18 months), purportedly on capital account. Practically speaking, this anti-avoidance rule seeks to prevent fully taxable profits/recoupments from being artificially converted into capital profits by means of an intervening asset-for-share swap.

National Treasury has expressed concern that this anti-avoidance measure is creating anomalies, and needs to be clarified. No further details were provided as to what these anomalies entail, or exactly what amendments are proposed.