TAX 2601 ASSIGNMENT 1 AND 2 2021

ASSIGNMENT 1: FIRST SEMESTER 2021 (continued) QUESTION 1 17 When interpreting the wording used in the Income Tax Act, the application of the contra fiscum rule may be necessary. What does this mean? (1) The court will apply the interpretation that is more favourable to SARS. (2) The court will apply the interpretation that places the bigger burden on the taxpayer. (3) The court will apply the interpretation that places the smaller burden on the taxpayer. (4) The court will apply the interpretation that is fair for both SARS and the taxpayer. QUESTION 2 In South Africa, taxpayers are taxed on a residence basis. What does this mean? (1) All South African residents are taxpayers. (2) People are taxed according to the area in which they reside. (3) Non-residents do not pay any tax in South Africa. (4) Residents are taxed on all income they earn, from anywhere in the world. QUESTION 3 Which interpretation rules are binding on SARS and taxpayers? (1) Binding class rulings (2) Binding general rulings (3) The opinion of SARS (4) Interpretation notes QUESTION 4 Which one of the following statements is true for the Alternative Dispute Resolution process? (1) SARS has to accept the taxpayer’s interpretation then the dispute will be resolved. (2) The taxpayer has to accept SARS’s interpretation then the dispute will be resolved. (3) SARS does not keep a register of disputes settled through this process as all cases are unique. (4) The process may be used to settle any dispute that relates to a dispute on interpretation of facts. QUESTION 5 Which one of the following statements is true relating to legal precedent? (1) A decision by the High Court is binding on the Supreme Court of Appeal. (2) A decision by the Tax Court is binding on the High Court. (3) A decision by the Tax Court is binding on the Supreme Court of Appeal. (4) A decision by the Supreme Court of Appeal is binding on the High Court. ASSIGNMENT 1: FIRST SEMESTER 2021 (continued) QUESTION 6 18 Which one of the following best depicts the taxable income calculation framework? (1) Deductions and allowances less income plus taxable capital gain. (2) Income less deductions and allowances plus taxable capital gain. (3) Income less taxable capital gain. (4) Deductions and allowances less taxable capital gain. QUESTION 7 What does the following statement mean: “the burden of proof vests with the taxpayer”? (1) It is the taxpayer’s responsibility to calculate his own tax payable. (2) It is the taxpayer’s responsibility to prove that the assessment is incorrect. (3) It is the taxpayer’s responsibility to prove that he submitted his tax return. (4) It is the taxpayer’s responsibility to notify SARS of his change in address. QUESTION 8 What does the understatement penalty not relate to? (1) Payment of incorrect amount to SARS. (2) Shortfall paid in respect of a penalty. (3) Omission or incorrect statement in the return. (4) Default in rendering a return. QUESTION 9 Neo has a refund of R600 outstanding for five months from SARS for the 2021 year of assessment. SARS credited her account with R6 interest, and she now has a total refund of R606 owed to her by SARS. She wants to know if the interest credit is an error. (1) The interest credit is an error as SARS does not pay interest on outstanding refunds. (2) The interest credit is not an error as SARS pays interest on outstanding refunds so Neo is entitled to the interest. (3) SARS will reverse the interest credit and only pay Neo the R600 refund owed to her. (4) SARS only charges interest on outstanding accounts and does not pay interest on outstanding refunds. QUESTION 10 Which one of the following statements does not apply to the understatement penalty calculation? (1) The understatement penalty percentages are not the same for each offence. (2) If more than one behaviour applies, SARS will add the understatement penalty table percentages together. (3) The understatement penalty percentage is applied only to the shortfall of the tax. (4) The maximum tax rate applicable to the taxpayer is u