question 1 gross income mr makubu is a south african resident who owns a panel beating mot
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Exempt Income
Special Deductions
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University of South Africa (Unisa)
LML4804 - Tax Law
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LML4804
Tax Law
PORTFOLIO MEMO
SEMESTER 1 - 2023
UNIQUE NUMBER: -
Due Date: - 1st June - 2nd June 2023
Includes Footnotes and/or Bibliography
QUESTION PREVIEW
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Mr Makubu is a South African resident who owns a panel beating (motor vehicle
repair) business, His-Way Mechanics, in Pretoria. On 13 January 2023, Mr Makubu
entered into a contract with Mr Naidoo whereby Mr Makubu was to purchase parts
needed for the repair of vehicles in his business in Pretoria. The agreement
provided that Mr Naidoo would be paid R10 000 upon conclusion of the contract
and R30 000 upon delivery of parts. Mr Naidoo was paid the R10 000 on 13 January
2023 and the balance was paid when the parts were delivered on 15 March 2023.
Mr Sithole worked as a motor mechanic for His-Way Mechanics for 10 years. In 2020
His- Way Mechanics engaged in a retrenchment exercise as part of the general
policy to reduce their staff due to continuing poor performance of the business. As
a result, Mr Sithole was retrenched on 30 November 2022. Mr Sithole received R500
000 upon retrenchment as compensation for the termination of his employment.
He was also paid R15 000 in respect of a restraint of trade, in terms of which he
was prohibited from engaging in any motor mechanic services and activities in and
around Pretoria for two years after termination of his employment.
WHAT IS REQUIRED OF YOU:
With reference to relevant authorities, answer the following questions for
2022/2023 year of assessment:
(a) Explain whether Mr Naidoo should include both amounts of R10 000 and the
balance of R30 000 in his gross income for 2022/2023 year of assessment. [8
marks]
(b) Does the lump sum payment received in respect of termination of services
form part of Mr Sithole’s gross income? [5 marks]
(c) Does any payment received in respect of a restraint of trade form part of Mr
Sithole’s gross income? [2 marks]
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