5. Rapid Track Limited – fines
Speedy Rodrigues, an employee of Rapid Track Limited, incurred numerous
fines for both speeding and parking offenses while using the company car.
Rapid Track Limited settled these fines amounting to R15 000.
6. Adrian Brave – patent
Upon Adrian Brave's return from a cricket tour to the West Indies, he spent
R7 000 to register a patent for a modified chest guard he had developed. During
the tour, he improvised a chest guard by attaching sponges to a standard one
to protect himself from the West Indian fast bowlers. It proved to be effective
and his patent application was approved in South Africa.
7. Village Homes (Pty) Ltd – interest
Village Homes (Pty) Ltd (‘Village Homes’) bought a block of flats from a
developer with the intention of earning income in the form of rentals. Village
Homes has a February year-end. On 1 February 2023, Village Homes borrowed
R9 000 000 at 10% a year to finance the purchase of the block of flats. During
the 2024 year of assessment interest of R900 000 was incurred. The flats were
let to tenants from 1 March 2023.With reference to the general deduction formula, section 11(a) of the Income Tax Act,
briefly and separately discuss the deductibility and the value of all the expenses.• Specify the sections that apply in cases where the provision of a special
deduction overrules the provisions of the general deduction formula.
• Ignore any capital gains tax and VAT implications