LML4804 Assignment 1 2026 | Due 19 August 2026 - Distinction Guaranteed

LML4804 ASSIGNMENT 1 2026


DUE: 19 AUG 2026


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.

FALSE

Employment is specifically included in the definition of "trade" in section 1(1). Therefore,
employees are considered to be carrying on a trade.

Silke Ch 6, par 6.2




1.2 Because employment is not a trade, no expenditure relating to employment
may be deducted under section 11(a).

FALSE

Employment IS a trade. While section 23(m) limits deductions for employees, certain
deductions are still permissible (e.g., section 11F retirement contributions, section 11(e)
wear and tear, home office expenses).

Silke Ch 6, par 6.5.12; Ch 7, par 7.4

, 1.3 A taxpayer whose only income is derived from employment can claim all
expenses incurred as a section 11(a) deduction.

FALSE

Section 23(m) prohibits the deduction of expenditure relating to employment except for
specified deductions (retirement fund contributions, legal expenses, wear and tear, bad
debts, certain home office expenses). Domestic and private expenses are also prohibited
under section 23(b).

Silke Ch 6, par 6.5.12




1.4 Interest paid on a loan used to buy shares in a company in order to earn
dividend income may never be deducted under section 11(a) or section 24J.

FALSE

Exceptions exist where such interest may be deductible:

Section 24O allows deduction where a controlling interest in an operating company is
acquired

The purpose test from CIR v Drakensberg Garden Hotel allows deduction if the purpose
is to obtain control of the business generating income, not just to receive dividends

Silke Ch 16, par 16.2.3.3 and 16.2.3.4