LML4804 - TAX LAW
ASSIGNMENT (03): Compulsory assignment - Written UNIQUE NUMBER
This assignment has to reach UNISA by 19 September 2016.
Your answer must not exceed eight (8) typed pages. If you exceed the page limitation, you will be penalised.
This assignment counts 15 per cent toward...
ASSIGNMENT (03): Compulsory assignment - Written UNIQUE NUMBER 744458
This assignment has to reach UNISA by 19 September 2016.
Your answer must not exceed eight (8) typed pages. If you exceed the page limitation, you will be penalised.
This assignment counts 15 per cent towards your final mark.
FACTS:
After winning R30m in the Lottery Powerball Competition, Mr Bugs Bunny, a South African resident resigned from his
work as a diesel mechanic for Boomerang (Pty) Ltd. On his resignation he receives R3m worth of shares and R1.5m in
cash as his severance package for having worked for the company for 25 years. His fortunes were increased when he
successfully sued the Cartoon Newspaper for R5m for having published his name as the winner of the Powerball
competition without his consent. Mr Bugs Bunny is married to his childhood sweetheart Olive in community of property,
and has three children Tom (aged 18); Jerry (aged 15) and an adopted daughter Mary (aged 20).
Mr Bunny sells his shares to his brother-in-law, Scooby Doo for R4m. Mr Bunny also uses part of his winnings to buy
Kruger Rands to the value of R5m which he donates to his wife as a birthday present. He sells his house which they lived
in with his family in Garfield Estates for R2.8m. They had bought the house five years ago for R1m. Prior to him selling
the house; Mr Bunny employed LIDO Valuators to evaluate the house. He paid them R16 000. He also employed
REALTIME estate agents to market and advertise the house. He paid them R80 000 for their services. He also sells his
favourite car, Mean Machine 3 for R250 000 and buys a more sporty Mean Machine 4 for R500 000. He buys a holiday
house in Looney Tunes Bay for R15m.
In May 2014, Olive made a donation to her children Tom, Jerry and adopted child Mary of R50 000 each .Thereafter Olive
made a donation of an amount of R100 000 to her husband (Bunny).
On assumption that all the transactions were made in the 2014/15 year of assessment answer the following questions:-
Summary of Facts
QUESTION 1: CAPITAL GAINS TAX (30 Marks)
Discuss the capital gains tax consequences of all the transactions and calculate the taxable capital gain of Mr Bunny (if any
QUESTION 2: TAX AVOIDANCE (20 Marks)
What are the income tax implications for Tom, Jerry, Mary, Olive, and Bunny for the amounts of R50 000 and R100 000 in
the 2014/2015 year of assessment
Transactions
Bugs Bunny
1 Lotto Winning - Received payout of
2 Resignation - Received Severence benefit of
3 Resignation - Received Boomerang (Pty) Ltd shares to the value of
4 Dilictual Liability claim - Received payout of
5 Sale of Boomerang (Pty) Ltd shares - Proceeds
,6 Purchase of Kruger Rands - Transaction value
7 Donates Kruger Rands to spouse - Tranasction value
8 Purchase of Fixed Property in Garfields Estates (5 years prior) - Purchase Price
9 Paid LIDO Valuators to evaluate the house - Transaction value
10 Employed REALTIME estate agents to market and advertise the house - Transaction value
11 Sale of Fixed Property in Garfield Estates - Proceeds
12 Sale of Movable property Mean Machine 3 - Proceeds
13 Purchase of Moveable property Mean Machine 4 - Transaction value
14 Purchase of Holiday home in Looney Tunes Bay - Transaction value
Olive
1 Donation to Tom (aged 18) - Transaction value
2 Donation to Jerry (aged 15) - Transaction value
3 Donation to Mary (aged 20) - Transaction value
4 Donation to Bunny (spouse) - Transaction value
, will be penalised.
an resident resigned from his
worth of shares and R1.5m in
nes were increased when he
he winner of the Powerball
ve in community of property,
20).
Tom (aged 18) 50000 Cash
Jerry (aged 15) 50000 Cash
s part of his winnings to buy
ells his house which they lived
for R1m. Prior to him selling
R16 000. He also employed
heir services. He also sells his
R500 000. He buys a holiday
Mary (aged 20) 50000 Cash
Olive 5000000 (Kruger rands)
50 000 each .Thereafter Olive
Bunny 100000 Cash
wer the following questions:-
Bugs Bunny
Married in COP to Olive
Children Tom (aged 18)
Jerry (aged 15)
capital gain of Mr Bunny (if any). Adopted child Mary (aged 20)
Received R 30,000,000.00 Lotto Winnings
R 3,000,000.00 Shares apon resignation Sell shares to
R 1,500,000.00 Severence Benefit (resignation) Buys Kruger Rands
ts of R50 000 and R100 000 in
R 5,000,000.00 Claim against Newspaper Donates kruger rands to Wife (O
Sell House (Primary Residence)
Purchase Price
Prior to sal
R 30,000,000.00 Sells Car
R 1,500,000.00 Buys car
R 3,000,000.00 Buys holiday house
R 5,000,000.00
R 4,000,000.00 Olive
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