1.3. A leading lung specialist (a SA resident) in private practice in the Republic of South Africawas flown to a Central African State to perform an operation on one of their top ministers.The president (of the African State) sent his private jet to fetch and return the specialist. Allhis expenses were paid and, although he did not wish to be paid for his services, thegovernment of the African State insisted on paying him the equivalent of R100 000.REQUIRED:1.3.1. Explain where the source of the income would be. (5)1.3.2. Explain with reasons whether the lung specialist will be taxed on the amount in theRepublic of South Africa.
Added by Bobby L.
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- The income earned by the lung specialist is derived from services rendered in a Central African State. According to South African tax law, the source of income is generally determined by the location where the services are performed. Since the operation took Show more…
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QUESTION 1 (10 marks, 12 minutes) You are a registered tax practitioner at "Experts in Tax" and are currently busy with the review of the taxable income calculation prepared by one of your clients: Investprops (Pty) Ltd ("Investprops"), a South African resident. Investprops owns investment properties from which rental income is earned. Investprops holds a 30% shareholding in Miniprops (Pty) Ltd (Miniprops), also a South African resident. Investprops has provided you with an extract of the items making up its "income" (as they interpret it) reflected in the company's taxable income calculation for the year of assessment ending 31 March 2022. Extract from the taxable income calculation: Income Amount Notes Additional information Rental income received from tenants R11,570,000 Amount received from XP (Pty) Ltd R240,000 1. XP (Pty) Ltd is one of Miniprops' tenants and they erroneously paid this amount into Investprops' bank account. Dividends received R700,000 2. The R700,000 is the net amount of dividends received of R1.2 million from Miniprops and dividends paid of R500,000 to Investprops' shareholders. Leasehold improvements R860,000 3. Leasehold improvements were incurred by a tenant in accordance with the lease agreement. The lease agreement stipulated that improvements of R600,000 were to be effected. However, the tenant incurred costs of R860,000. Total R13,370,000 REQUIRED: MARKS Explain whether each amount should be included or not in Investprops (Pty) Ltd's "income" (as defined in the Income Tax Act) for the 31 March 2022 year of assessment. No calculations are required, but reasons should be provided in your discussion. You do not need to refer to any case law.
Akash M.
Mrs. James, a SA resident, aged 47 and an employee of Bells Limited, was retrenched on 31 May 2015 when Trading Limited had effected a general reduction of staff. In terms of his retrenchment package he received a lump sum of R60 000. In addition, he was paid out an amount of R6 000 in respect of leave that was due to him. For the period ended 31 May 2015 Mr James had earned a salary of R9 000 per month. This was unfortunately the second time that Mr James had lost his job. The first time was in 2008 when his employer ceased carrying on the trade by which Mr James was employed. His employer had paid him an amount of R8 000 as compensation at that time. Mr James used part of his lump sum to purchase an annuity, at a cost of R40 000, on 1 July 2015 for 10 years from an insurer. Under this contract Mr James was to receive R600 per month commencing from 31 July 2015. Mr James used the monthly income to invest R600 in unit trusts (capital investment). Mr James received interest of R100 and local dividends of R160 for the year ended 29 February 2016 in respect of the unit trusts. Mr James also received the following in respect of the year ended 29 February 2016: Interest on special savings accounts R23 000 Net rentals from a flat inherited from his late father R55 000 Annuity from a domestic family trust R12 000 (The annuity was funded equally out of South African dividend and interest income). Required: Calculate Mr James’ taxable income for the year of assessment ended 29 February 2016. Show all calculations.
QUESTION FOUR [25] 4.1. John Doe is a resident of the republic. He has an assessed capital loss of R13,000 brought forward from the 2018 year of assessment. During the 2019 year of assessment, he suffered a capital loss of R45,000 on the sale of his domestic motor car. He made capital gains on the sale of the following capital assets: • R80,000 from a rent-producing property; • R7,000 from dividend-yielding shares; • R5,000 from units in a so-called real estate investment trust; and • R20,000 from a six-meter yacht (a personal-use asset). It must be noted that John Doe does not deal in the above assets. Required: Determine John Doe's taxable capital gain for the 2019 year of assessment. (15) 4.2 On 1 December 2017, Suvi Singh, a resident of the republic, purchased a primary residence for R2,300,000. She used the granny flat portion of her primary residence as her consulting rooms. (In other words, she traded from a portion of her primary residence.) The granny flat portion of this primary residence comprises 20% of the total primary residence. She lived in this primary residence and practiced from its granny flat for the 14-month period from 1 December 2017 until 31 January 2019. On 1 February 2019, she sold her primary residence for R4,000,000. Required: Determine the capital gains tax consequences that result from the purchase and sale by Suvi Singh of her primary residence. (10)
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