ASSIGNMENT 5 WITH NOTES
TAX2601
ASSIGNMENT 05
EXAM PACK WITH SOLUTIONS.
SEMESTER 2 2022
,QUESTION 1
EXPLAINING
Rental Sales from tenants Rental sales from tenants qualifies as gross
income as it satisfies al the elements of the
gross income definition, that is, the total
amount
is received by, has accrued to, or is in favor of
the resident in cash or otherwise
during the year of assessment, and it is not of a
capital nature. Therefore Rental sales should be
included in gross income
Amount received from XP(pty) The amount received from XP(pty)Ltd though it
was received by n Investprops (Pty) Ltd, it was
not in their favor as it will have to be
Reimbursed. The amount was erroneously paid
Into the account.
Dividends Received The R700 000 will constitute gross income to
investprops as it was received during the
current year of assessment and is not of a
capital nature. However it should be noted that
dividend income is exempt from income tax and
therefore will not constitute taxable income.
Leasehold improvements The leasehold improvements incurred by
tenant, though accruing to Investptprops do not
constitute gross income as they are expenditure
of a capital nature. The definition of gross
income specifically excludes receipts of a capital
nature.
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,QUESTION 2
CALCULATE THE TAX LIABILITY
R R
Taxable income - given 5 529 340
New Manufacturing asset
Manufacturing Asset N8 Cost 1 000 000
Capital allowance 2022 (SBC Sec12C) (1 000 000) (1 000 000)
New NON Manufacturing asset
Non-Manufacturing Asset N9 Cost 750 000
Capital allowance 2022 (SBC Sec12C) = (375 000) (375 000)
375 000
Second hand Manufacturing asset
Second hand Manufacturing Asset N10 Cost 300 000
Capital allowance 2020 (SBC Sec12C) (300 000)
tax value NIL
Capital allowance 2021 (SBC Sec12C) NIL
NIL
New Manufacturing E2
Cost 1 June 2020 120 000
Capital allowances 2021 (120 000)
Tax value 2021 NIL
Tax value 2022 NIL
Proceeds on disposal 70 000
Recoupment 70 000 70 000
Delivery Vehicle
Cost 3 April 2020 480 000 00
Capital allowances 2021 @50% (240 000)
Tax Value 2021 240 000
Capital allowances 2022 @30% (72 000)
Tax Value 2022 168 000
Proceeds on disposal 5 000
Scraping allowance 163 000 (163 000)
, Office Space
New Administrative Building (1 April2021) cost 500 000
Capital allowances 5% 25 000 (25 000)
Tax value 475 000
Office Equipment @COST (31 August2020) 85 000
Moving Costs 11 000
Wear and tear moving costs 30% 3 300 (3 300)
Computer mainframe @ Cost 38 000
Wear and tear (the mainframe constitute a (19 000) (19 000)
separately identifiable moving asset of the
small business Corporation 50%)
19 000
Patent @ cost 250 000
Allowance @5% (12 500) (12 500)
Patent Renewal allowance (10 000)
trademark @COST 95 000 -
not deductible – purchased NIL NIL
Research and development
Salaries (2000000*150%) (3 000 000)
Marketing costs of (56 000*100%) incurred (56 000)
before approval
New Research Machine cost (8 June2021) 1 000 000
Capital Allowances(0.5*1000000) 2022 (500 000) (500 000)
Tax value 2022 500 000
Government grant(450000) - exempt NIL
Insuarance (1/12*286000) (23 833.33)
Bad debts (50 000)
Bad debts in respect of staff loans are not NIL NIL
deductible as they were not previously
included in income
Doubtful debts allowance claimed in 2021 29 640
25% of debt 60 days or more in arrears but 0.25*(35700+16500) (13 050)
less than 120 days
40% of debt 120 days or more 0.4*50600 (20 240)
Legal Fees (21 000)
Damages (55 000)
Restraint of trade (s 11(cA)) – deduction is 187 500 (187 500)
the lesser of 750 000/4
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TAX2601
ASSIGNMENT 05
EXAM PACK WITH SOLUTIONS.
SEMESTER 2 2022
,QUESTION 1
EXPLAINING
Rental Sales from tenants Rental sales from tenants qualifies as gross
income as it satisfies al the elements of the
gross income definition, that is, the total
amount
is received by, has accrued to, or is in favor of
the resident in cash or otherwise
during the year of assessment, and it is not of a
capital nature. Therefore Rental sales should be
included in gross income
Amount received from XP(pty) The amount received from XP(pty)Ltd though it
was received by n Investprops (Pty) Ltd, it was
not in their favor as it will have to be
Reimbursed. The amount was erroneously paid
Into the account.
Dividends Received The R700 000 will constitute gross income to
investprops as it was received during the
current year of assessment and is not of a
capital nature. However it should be noted that
dividend income is exempt from income tax and
therefore will not constitute taxable income.
Leasehold improvements The leasehold improvements incurred by
tenant, though accruing to Investptprops do not
constitute gross income as they are expenditure
of a capital nature. The definition of gross
income specifically excludes receipts of a capital
nature.
1|Page
,QUESTION 2
CALCULATE THE TAX LIABILITY
R R
Taxable income - given 5 529 340
New Manufacturing asset
Manufacturing Asset N8 Cost 1 000 000
Capital allowance 2022 (SBC Sec12C) (1 000 000) (1 000 000)
New NON Manufacturing asset
Non-Manufacturing Asset N9 Cost 750 000
Capital allowance 2022 (SBC Sec12C) = (375 000) (375 000)
375 000
Second hand Manufacturing asset
Second hand Manufacturing Asset N10 Cost 300 000
Capital allowance 2020 (SBC Sec12C) (300 000)
tax value NIL
Capital allowance 2021 (SBC Sec12C) NIL
NIL
New Manufacturing E2
Cost 1 June 2020 120 000
Capital allowances 2021 (120 000)
Tax value 2021 NIL
Tax value 2022 NIL
Proceeds on disposal 70 000
Recoupment 70 000 70 000
Delivery Vehicle
Cost 3 April 2020 480 000 00
Capital allowances 2021 @50% (240 000)
Tax Value 2021 240 000
Capital allowances 2022 @30% (72 000)
Tax Value 2022 168 000
Proceeds on disposal 5 000
Scraping allowance 163 000 (163 000)
, Office Space
New Administrative Building (1 April2021) cost 500 000
Capital allowances 5% 25 000 (25 000)
Tax value 475 000
Office Equipment @COST (31 August2020) 85 000
Moving Costs 11 000
Wear and tear moving costs 30% 3 300 (3 300)
Computer mainframe @ Cost 38 000
Wear and tear (the mainframe constitute a (19 000) (19 000)
separately identifiable moving asset of the
small business Corporation 50%)
19 000
Patent @ cost 250 000
Allowance @5% (12 500) (12 500)
Patent Renewal allowance (10 000)
trademark @COST 95 000 -
not deductible – purchased NIL NIL
Research and development
Salaries (2000000*150%) (3 000 000)
Marketing costs of (56 000*100%) incurred (56 000)
before approval
New Research Machine cost (8 June2021) 1 000 000
Capital Allowances(0.5*1000000) 2022 (500 000) (500 000)
Tax value 2022 500 000
Government grant(450000) - exempt NIL
Insuarance (1/12*286000) (23 833.33)
Bad debts (50 000)
Bad debts in respect of staff loans are not NIL NIL
deductible as they were not previously
included in income
Doubtful debts allowance claimed in 2021 29 640
25% of debt 60 days or more in arrears but 0.25*(35700+16500) (13 050)
less than 120 days
40% of debt 120 days or more 0.4*50600 (20 240)
Legal Fees (21 000)
Damages (55 000)
Restraint of trade (s 11(cA)) – deduction is 187 500 (187 500)
the lesser of 750 000/4
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