TAX3704 Assignment 2 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED Answers, guidelines, workings and references ..Question 1: (35 marks) Background information Your best friend Ntato Hill called you and asked for assistance regarding an audit SARS is conducting on her husband, Jack’s business. The following information may or may not be relevant. • Jack Hill is 70 years old and runs a business (as sole proprietor) that manufactures spare parts for industrial machinery. He was in a serious motor vehicle accident in April 2022 and was discharged from the hospital only in March 2023. After his accident, Jack’s wife appointed an accountant to take over Jack’s financial responsibilities and an engineer to assist in the factory. • The newly appointed accountant prepared the financial statements for the 2022 financial year and submitted a return on behalf of Jack before the deadline of 21 January 2023. • The return submitted by the accountant states that the business made a loss of R200 000. In the past 25 years, the business always made taxable profits. The SARS risk engine flagged Jack as a risk case, and the audit commenced after Jack had been given the required notice. Observation You decide to make notes relating to the risks associated with the audit Risks There is a possibility that the newly appointed accountant did not disclose all the income earned by the business. SARS may issue an estimated assessment. Jack may be unable to pay his outstanding tax debt. REQUIRED MARKS (a) Explain to Jack what statutory powers are granted to a senior SARS official under a request for relevant material. Refer to applicable tax legislation. 10 (b) Describe to Jack what the burden of proof means in terms of section 102 of the TAA and who carries the burden, SARS or the taxpayer. 9 (c) Explain whether SARS may issue an estimated assessment for Jack’s taxable income and tax due. Refer to applicable tax legislation. 6 (d) (i) List the criteria for an instalment payment agreement between SARS and the taxpayer (6 marks). (ii) Explain if SARS can terminate the agreement (4 marks).
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