TAX2601 Assignment 1 (COMPLETE ANSWERS) Semester 1 2025 - DUE 7 April 2025

TAX2601 Assignment 1
(COMPLETE ANSWERS)
Semester 1 2025 - DUE 7
April 2025

, TAX2601 Assignment 1 (COMPLETE
ANSWERS) Semester 1 2025 - DUE 7 April
2025

Mr Xhumalo lives in Gqeberha, South Africa. He
manufactures and sells various grass baskets and
placemats from a street stall. Due to the high
demand for his products, he concluded a sales
agreement with a well-known houseware retailer in
South Africa. In terms of the agreement, the
retailer will purchase R25 000 worth of products
from Mr Xhumalo on 15 February 2025 on credit.
The goods must be manufactured and delivered by
15 March 2025, with payment scheduled for 31
March 2025. The agreement clearly states that Mr
Xhumalo will only become entitled to payment
once he has delivered the goods. Mr Xhumalo’s
accountant is uncertain in which year of
assessment the R25 000 must be declared for tax
purposes and contacted you for advice. REQUIRED
MARKS Discuss whether the R25 000 of the sale
will constitute gross income in the hands of Mr
Xhumalo for the 2025 year of assessment. Note: •
You can support the main issue in the question
with relevant case law from the module's
prescribed case law. 12 🔹
Issue:

Should Mr Xhumalo include the R25 000 in his 2025 year of assessment as gross
income?

🔹 Relevant Legal Framework:

Definition of Gross Income (Section 1 of the Income Tax Act):

"Total amount, in cash or otherwise, received by or
accrued to or in favour of a taxpayer during the year or
period of assessment..."

Accrual Principle (Case Law):