TAX2601 Assignment 3 Semester 2 2023 (SOLUTIONS/ANSWERS)
QUESTIONS ASKED:
TAX2601
2023 Semester 2
ASSESSMENT 3 — QUESTIONS
The due date for this assessment is 4 September 2023 @ 10h00.
The assessment covers learning units 3 — 5.
TAX2601/2023/Semester 2/Assessment 3
Instructio...
, QUESTION 1
Assumptions:
1. All amounts exclude VAT unless stated otherwise.
2. All persons mentioned are residents of the Republic of South Africa unless stated
otherwise.
3. SARS = South African Revenue Service.
Question 1: Part A - Health Harmony (Pty) Ltd
Preliminary Taxable Income: R6,785,000
1. Dividends Received: R50,000
• Dividends received from a South African company are generally exempt from
income tax.
Reason: Exempt from tax as it's a local dividend.
2. Rental Income & Improvements:
• Monthly Rent: R15,000
• Lease Period: 9 months (July 2022 to March 2023)
• Total Rental Income: R15,000 x 9 = R135,000
• Improvement costs by the tenant: R130,000
• The improvements are a capital expenditure and won't reduce rental income for tax
purposes.
Reason: Improvements are a capital expense by the tenant, not deductible from the
rental income.
Additional Incomes to be considered:
• Dividends Received: R0 (Exempt)
• Rental Income: R135,000
Additional Expenses to be considered:
• Marketing expense: R90,000
• Patents & related costs: R95,000
Reason: These are capital in nature but could potentially be amortized.
• Bad debts: R71,000
• Restraint of trade: R1,000,000
Reason: This is usually amortized over the period of the restraint. Needs further
details for accurate treatment.
Calculations:
• Preliminary Taxable Income: R6,785,000
• Additional Income: R135,000
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