ACCOUNTING AQ062-3-3 Advanced Taxation _ AQ009-3-3-TP FINAL EXAMINATION

ACCOUNTING AQ062-3-3 Advanced Taxation _ AQ009-3-3-TP FINAL EXAMINATION Tom and Nicole were married for 10 years and they got divorced in 2015. Following the divorce, Jack (52 years old) decided to p urchase a house for which he expects to pay about RM2million. He has considered the following possibilities (using one or more to finance the purchase) - Income resources consisting of earning and dividend from MMC International. Earnings amount to be about RM350,000 per annum and dividends on his holdings of ordinary share in MMC International about RM50,000 per annum gross - Sale of shares or option over shares in MMC International. Besides his 1 million ordinary shares, he also has options over 800,000 ordinary shares of RM1 each. The option was granted to him in 2004 for a consideration of 5 cent per share. It entitles him to exercise the option in any amount and at any time up to 31 December 2015 at a price of RM2 per share. The market value of MMC International ordinary share at the time when the option was granted was RM4 per share and at the present time it is RM2.50 per share. The price is expected to go up to RM5/RM10 in the next few years. - His Employees Provident Fund balances which now amounts to about RM1 million altogether. REQUIRED: i. Evaluate Tom on the tax implications of the methods listed to finance his property purchase. (30 marks) ii. Determine on the characteristics that need to be present in order for Inland Revenue to accept the gains on disposal of shares to be a capital gain.