LML4804 Assignment 1 (COMPLETE ANSWERS) Semester 2 2026 - DUE 19 August 2026; 100% Correct solutions and explanations.

LML4804 Assignment 1 (COMPLETE ANSWERS) Semester 2 2026 - DUE 19 August 2026; 100% Correct solutions and explanations. ASSIGNMENT (01): Compulsory assignment – Written Opens: Monday, 3 August 2026, 8:00 AM Due: Wednesday, 19 August 2026, 9:00 PM • This assignment must reach UNISA by 19 August 2026 on or before 9:00PM (No extension). • Your answer must not exceed eight (8) typed pages (9 written). Pages more than the limitation will not be marked. This excludes the cover page, table of contents and the plagiarism declaration if any. QUESTION 1 (DEDUCTIONS) 1 Indicate whether the following is True or False. (5 Marks) 1.1 Expenditure can only be deducted under section 11(a) if the taxpayer carries on trade. 1.2 Because employment is not a trade, no expenditure relating to employment may be deducted under section 11(a). 1.3 A taxpayer whose only income is derived from employment can claim all expenses incurred as a section 11(a) deduction. 1.4 Interest paid on a loan used by shares in a company in order to earn dividend income may never be deducted under section 11(a) or section 24J. 1.5 In order to be actually incurred, an expense must be paid. 2. S’Celo graduated from the University of Biology with a BSc in Agriculture Economics in 2024. In April 2025, after completing his internship program at the Eyethu Sonke Farmers Association, he was not retained for permanent employment due to lack of funds. In May 2025, he registered a company called S’Celo’s Fresh Farm Produce (Pty) Ltd. The company specialised on the supply of chicken eggs, chickens and vegetables in the Province of Mpumalanga. In addition, the company was awarded a 24-month project to provide agricultural economics advise to the Department of Agriculture in Mpumalanga province. On 1 June 2025, S’Celo purchased an old house in eMalahleni which he transformed into an office space. This house cost him R650 000 including estate agent’s commission and transfer costs. On 10 June 2025, S’Celo paid Mandlendoda Construction R500 000 to transform the house into an office space. S’Celo also purchased office furniture at a cost of R30 500. On 1 September 2025, S’Celo commenced with business. Advise S’Celo, with reference to case law and relevant authority, on the deductibility of the above expenditures. (10 Marks) 3. Mr X is a South African and an attorney trading as a sole proprietor in the city of Tshwane. In terms of his work policy, he does not render any service to his clients without prior payment into his trust account. Accordingly, at the end of the 2025/26 year of assessment Mr X had an amount of R175 000 in his trust account for the work he needed to do. Despite his work policy, Mr X failed to ensure that other clients deposit money in his trust account before rendering legal services. Therefore, he issued invoices to those clients who did not make payments into his trust account to collect the outstanding amounts. The invoices specified that if the client settled the outstanding account before 1 April 2025, the client would only need to pay ninety per cent (90%) of the invoiced amount. Failure to pay before this date would mean that the client must pay the entire amount (100%). At the end of the 2025/26 year of assessment, none of the clients who received invoices had made a payment. Discuss the income tax consequences for Mr X’s 2025/26 year of assessment. (8 Marks) 4. In December 2025, Mr Soap purchased a new plot in Tzaneen, Limpopo on which he erected a house. On 1 March 2026, Mr Soap decided to rent out the house on a permanent basis. He entered into a three-year renewable lease agreement with Ms Brown. In terms of the lease agreement, Ms Brown will pay a monthly rental of R12 000. The lease agreement also provided that Ms Brown must erect a wooden deck and outdoor braai (Barbeque) at her own expense. In consideration, Mr Soap will upon completion of the construction of the deck and braai waive two months of rental. Ms Brown duly completed the construction, and Mr Soap waived the rental for April and May 2026. Advise Mr Soap whether the value of the improvements to the leased property must be included in his gross income for the 2025/26 year of assessment. Also advise him on waiver of the rental for April and May 2026. (7 Marks) Total for Assignment 01 [30 marks] *********END******** No extension!!!