Exam (elaborations)

TAX2601 EXAM PACK

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Course
TAX2601 - Principles Of Taxation

Institution
University Of South Africa

TAX2601 EXAM PACK [TURN OVER] UNIVERSITY EXAMINATIONS Oct/Nov 2020 TAX2601 Principles of Taxation 100 Marks Duration 3 Hours (including 60 minutes for upload) This paper consists of nine (9) pages plus the annexure (p i). IMPORTANT INSTRUCTIONS: 1. All amounts exclude VAT unless stated o...

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tax2601 exam pack

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University of South Africa
Course
TAX2601 - Principles Of Taxation

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TAX2601 EXAM PACK

,UNIVERSITY EXAMINATIONS

Oct/Nov 2020

TAX2601

Principles of Taxation

100 Marks
Duration 3 Hours
(including 60 minutes for upload)

This paper consists of nine (9) pages plus the annexure (p i).

IMPORTANT INSTRUCTIONS:

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

The answering of this paper:
1. This paper consists of four (4) questions.

2. Answer all the questions.

3. Start each question on a new (separate) page.

4. Write your student number on the top of each page.

5. Show all workings, where applicable. Where an amount is subject to a limitation, clearly indicate the
application of the limitation. Where any item is exempt from tax or not allowable as a deduction, this must
be indicated, and a brief reason provided. All amounts must be rounded to the nearest Rand.

6. Proposed timetable (try as far as possible not to deviate from this timetable):

Question Topic Marks Minutes
1 Income tax liability of a company 25 30
2 Income tax liability of a small business corporation 25 30
3 Capital gains tax 25 30
Provisional tax payments and general deduction
4 25 30
formula
- Additional time for upload of your answer file in pdf - 60

TOTAL 100 180

[TURN OVER]

, 2 TAX2601
Oct / Nov 2020

Honesty Declaration:

By submitting my exam solution, I declare that:
• I know what plagiarism is, that plagiarism is wrong and that disciplinary steps can be taken against me if I
am found guilty of plagiarism;
• This exam solution, submitted by myself, is my own work;
• I have not assisted any other student in any manner, and I have not had the assistance of any other person,
in completing this exam;
• I know that if I am found to be in violation of this declaration, I will receive 0% for this examination.

Please note: You do not have to sign the declaration. By clicking the honour pledge when submitting your
answer file, you automatically declare that you adhere to all the above with regards to this specific
examination.

Submission instructions:

The exam paper will remain available throughout the examination session.

Commence the submission (uploading) of your answers (one pdf file with all the pages included) as soon as
you have completed the assessment, do not wait for the session to conclude.

Suggestion: Start uploading your answer file at 10:30 (2 hours after the start of the exam session) at the
latest, to allow enough time for any delays in the process.

You have to submit your answers in ONE PDF FILE – ensure ALL your pages are in one file.
The file name of your pdf document must be in the following format:
Student number, space, TAX2601. For example: 33445566 TAX2601.

Submission method 1:
• Go back to the link where you downloaded your examination paper from the landing page of
myUnisa.
• Click on the link “Submit answer file”.
• Follow the instructions on the screen.

or

Submission method 2:
• Go to myUnisa.
• Log in with your student number and password.
• Select the module in the “assessment info” tab.
• Follow the instructions on the screen.

[TURN OVER]

, Stuvia.com - The study-notes marketplace

3 TAX2601
Oct / Nov 2020

QUESTION 1 (25 marks, 30 minutes)

Solcon (Pty) Ltd manufactures glass containers. It is not a small business corporation as defined in the
Income Tax Act and its operations meet the requirements of a manufacturing process.

The following information is available for calculating the company's taxable income for the year of
assessment ended 31 March 2020.

1. Taxable income amounts to R3 300 000, before taking the information below into account.

2. Solcon (Pty) Ltd paid pension fund contributions of R50 000 during the year on behalf of an
employee.

3. The company paid an annuity of R25 000 to the wife (a dependent) of a deceased employee (the
employee died during the year of assessment).

4. A restraint of trade compensation of R900 000 was paid to the financial manager, who resigned,
on 1 February 2020. The restraint is effective for two years and the full amount was included in
the financial manager’s income in his 2020 income tax return.

5. A trademark licence was renewed on 1 January 2020 for R7 000. A new trademark was also
purchased on 1 February 2020 for R35 000.

6. Solcon (Pty) Ltd donated trading stock during the year, which was acquired in the previous year
of assessment at a cost of R15 500, to a local farmer’s market. The donation does not qualify for
the section 18A deduction. The market value of the trading stock on the date it was donated was
R19 000.

7. The cost price of fixed assets that Solcon (Pty) Ltd used during the tax year consists of the follow-
ing:
R
- Manufacturing machine Z purchased new on 1 May 2019…………………………… .. 650 000

- Truck purchased second-hand on 1 December 2019 ................................................ 600 000

- Security alarm system purchased on 1 March 2019 ................................................. 60 000

- Manufacturing building purchased on 1 January 2015 ............................................ 4 500 000

- Newly erected commercial building situated within an urban development zone
brought into use on 1 August 2019. All the requirements for an urban
development zone allowance has been met. ......................................................... 2 100 000

- Manufacturing machine A purchased second-hand on 1 April 2019. This machine
was sold on 31 January 2020 for R100 000.…. ....................................................... 200 000

Binding General Ruling no.7 makes provision for the following write-off periods for assets:

- Trucks 4 years
- Security alarm system 6 years

Solcon (Pty) Ltd has elected to apply the section 11(o) scrapping allowance, where applicable.

8. The annual insurance premium of R220 000 for the period from 1 January 2020 to
31 December 2020 was paid on 2 January 2020 to an insurance company.

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