TAX3702 Assignment 03 2021

Course Code: TAX 3702 Assignment No: 03 Closing Date: 16 August 2021 ______________________________________________________________________________ Question 1 For an amount to be included in gross income, it must satisfy all the requirements of the general definition of “gross income”. That is:  the total amount in cash or otherwise  received by or accrued to  during the year of assessment  not of capital nature. Or, alternatively, the amount may also be included in tax payer’s gross income via one of the special inclusions as set out in paragraphs (a) to (n) of the gross income definition. (i)Amount in to be included in Mrs Kane’s gross income in terms of sales  The R60 000 sales amount was coincidently received and accrued during the 2021 year of assessment  The inclusion hinges on whether it is of capital or revenue nature. The amount is of revenue in nature because it was generated through sales.  The amount was received for Mrs. Kane’s own benefit as per percentage sharing arrangements.  HerbLife will receive (R60 000 x 80%) R48 000 of the sales amount received from customers by Mrs. Kane whereas she will retain the remaining 20% as part of her gross income.  Therefore, (R60 000 x 20%) R12 000 is for Mrs Kane’s own benefit and as such qualifies for inclusion in her gross income for tax purposes.  Geldenhys case here refers. (ii)Amount to be included in Mrs Kane’s gross income in terms of the deposit  An amount received in advance for work still to be performed, such as deposit of R12 000, will be included in Mrs Kane’s gross income. This inclusion is supported by the principle as set out by the court in Pyott case. It therefore means that the amount as received, accrued to Mrs Kane