TAX2601
ASSIGNMENT 1
SEMESTER 2 2026
UNIQUE NO.
DUE DATE: 4 SEPTEMBER 2026
,Principles of Taxation - TAX2601
Assignment 1 Semester 2 2026
QUESTION 1
Issue
The issue is whether the R1,000,000 received by Portia Financial Advisory (Pty) Ltd
(“PFA”) on 1 June 2025 must be included in PFA’s gross income for the 2026 year of
assessment.
PFA is a South African resident company and has a financial year ending on 28
February. The R1 million was received upfront from a client for investment purposes.
PFA kept the money in a separate bank account and was contractually required to
return any amount that remained uninvested within 12 months. PFA's actual
remuneration is 5% of the returns generated from the investments.
The definition of “gross income” in section 1 of the Income Tax Act must therefore
be applied to the R1 million.
Requirements and discussion
Requirement Discussion
The R1,000,000 was actually received by PFA on 1
June 2025. Therefore, the receipt requirement is
1. Amount received by or satisfied. However, merely receiving an amount does
accrued to the taxpayer not automatically mean that it forms part of gross
income. The nature of the receipt must also be
considered.
, Requirement Discussion
This is the critical issue. PFA did not receive the R1
million as its own income. The facts indicate that the
money was entrusted to PFA to invest on the client's
2. Amount must be behalf. PFA kept the funds in a separate bank
received/accrued by the account and was contractually obliged to return any
taxpayer for its own benefit amount that remained uninvested within 12 months.
This indicates that PFA was holding the money in a
representative/custodial capacity for the client rather
than receiving it for its own benefit.
The R1 million represents the client's investment
3. The amount must be capital. PFA is not entitled to retain the R1 million as
income of the taxpayer, remuneration. PFA's remuneration is separately
rather than capital or an determined as 5% of the returns generated from the
amount held on behalf of investments. Therefore, the R1 million itself is not
another person income belonging to PFA. It is an amount that PFA is
required to administer/invest on behalf of the client.
Although the amount was received during the relevant
period, the R1 million does not constitute an amount
received by PFA for its own benefit. The contractual
4. The amount must fall
obligation to return the uninvested balance further
within the statutory
supports the conclusion that PFA did not obtain
definition of gross income
beneficial entitlement to the R1 million. Consequently,
the R1 million does not constitute PFA's gross income
for the 2026 year of assessment.
Conclusion
ASSIGNMENT 1
SEMESTER 2 2026
UNIQUE NO.
DUE DATE: 4 SEPTEMBER 2026
,Principles of Taxation - TAX2601
Assignment 1 Semester 2 2026
QUESTION 1
Issue
The issue is whether the R1,000,000 received by Portia Financial Advisory (Pty) Ltd
(“PFA”) on 1 June 2025 must be included in PFA’s gross income for the 2026 year of
assessment.
PFA is a South African resident company and has a financial year ending on 28
February. The R1 million was received upfront from a client for investment purposes.
PFA kept the money in a separate bank account and was contractually required to
return any amount that remained uninvested within 12 months. PFA's actual
remuneration is 5% of the returns generated from the investments.
The definition of “gross income” in section 1 of the Income Tax Act must therefore
be applied to the R1 million.
Requirements and discussion
Requirement Discussion
The R1,000,000 was actually received by PFA on 1
June 2025. Therefore, the receipt requirement is
1. Amount received by or satisfied. However, merely receiving an amount does
accrued to the taxpayer not automatically mean that it forms part of gross
income. The nature of the receipt must also be
considered.
, Requirement Discussion
This is the critical issue. PFA did not receive the R1
million as its own income. The facts indicate that the
money was entrusted to PFA to invest on the client's
2. Amount must be behalf. PFA kept the funds in a separate bank
received/accrued by the account and was contractually obliged to return any
taxpayer for its own benefit amount that remained uninvested within 12 months.
This indicates that PFA was holding the money in a
representative/custodial capacity for the client rather
than receiving it for its own benefit.
The R1 million represents the client's investment
3. The amount must be capital. PFA is not entitled to retain the R1 million as
income of the taxpayer, remuneration. PFA's remuneration is separately
rather than capital or an determined as 5% of the returns generated from the
amount held on behalf of investments. Therefore, the R1 million itself is not
another person income belonging to PFA. It is an amount that PFA is
required to administer/invest on behalf of the client.
Although the amount was received during the relevant
period, the R1 million does not constitute an amount
received by PFA for its own benefit. The contractual
4. The amount must fall
obligation to return the uninvested balance further
within the statutory
supports the conclusion that PFA did not obtain
definition of gross income
beneficial entitlement to the R1 million. Consequently,
the R1 million does not constitute PFA's gross income
for the 2026 year of assessment.
Conclusion
