, TAX2601
ASSIGNMENT 1 SEMESTER 2
2026
DUE 4 SEPTEMBER 2026
QUESTION 1 (14 marks, 17 minutes)
Requirement Discussion & Application
The R1 million is an amount in cash, which clearly falls within the definition of "amount" for
1. "Amount"
gross income purposes.
The core issue is whether PFA "received" the R1 million for its own benefit. The legal principle
is that 'received by' means received by the taxpayer "on his own behalf for his own benefit".
PFA is contractually obliged to return any uninvested funds. This is similar to an agent or
trustee holding money for another, which courts have ruled is not a receipt for the taxpayer's
own benefit. While the MP Finance case held that an immediate obligation to repay does not
automatically preclude a receipt, that case was distinguished by the taxpayer's intention to
2. "Received
retain the funds for its own benefit. Here, PFA holds the funds in a separate bank account and
by"
is obliged to return the uninvested portion, indicating it acts as a fiduciary and not for its own
benefit. Unlike the illegal scheme in MP Finance where the operators intended to keep the
money, PFA's intention is to manage the funds for the client. A key authority is Brookes Lemos
Ltd v CIR, which established that deposits held on behalf of customers are not "received" for
the taxpayer's benefit if they are not the taxpayer's own money. Therefore, the R1 million does
not satisfy the "received by" requirement.
An amount "accrues" when a taxpayer becomes unconditionally entitled to it. PFA only
becomes entitled to its 5% fee on returns generated. It has no unconditional right or
3. "Accrued to"
entitlement to the R1 million principal amount itself. As such, the R1 million has not "accrued"
to PFA.
Since the R1 million is neither "received by" nor has it "accrued to" PFA, it does not form part
4. "Not of a of its gross income. It is therefore not necessary to consider whether the amount is of a capital
capital nature" or revenue nature. This requirement only needs to be assessed if the previous requirements
are met.
ASSIGNMENT 1 SEMESTER 2
2026
DUE 4 SEPTEMBER 2026
QUESTION 1 (14 marks, 17 minutes)
Requirement Discussion & Application
The R1 million is an amount in cash, which clearly falls within the definition of "amount" for
1. "Amount"
gross income purposes.
The core issue is whether PFA "received" the R1 million for its own benefit. The legal principle
is that 'received by' means received by the taxpayer "on his own behalf for his own benefit".
PFA is contractually obliged to return any uninvested funds. This is similar to an agent or
trustee holding money for another, which courts have ruled is not a receipt for the taxpayer's
own benefit. While the MP Finance case held that an immediate obligation to repay does not
automatically preclude a receipt, that case was distinguished by the taxpayer's intention to
2. "Received
retain the funds for its own benefit. Here, PFA holds the funds in a separate bank account and
by"
is obliged to return the uninvested portion, indicating it acts as a fiduciary and not for its own
benefit. Unlike the illegal scheme in MP Finance where the operators intended to keep the
money, PFA's intention is to manage the funds for the client. A key authority is Brookes Lemos
Ltd v CIR, which established that deposits held on behalf of customers are not "received" for
the taxpayer's benefit if they are not the taxpayer's own money. Therefore, the R1 million does
not satisfy the "received by" requirement.
An amount "accrues" when a taxpayer becomes unconditionally entitled to it. PFA only
becomes entitled to its 5% fee on returns generated. It has no unconditional right or
3. "Accrued to"
entitlement to the R1 million principal amount itself. As such, the R1 million has not "accrued"
to PFA.
Since the R1 million is neither "received by" nor has it "accrued to" PFA, it does not form part
4. "Not of a of its gross income. It is therefore not necessary to consider whether the amount is of a capital
capital nature" or revenue nature. This requirement only needs to be assessed if the previous requirements
are met.
