Exam (elaborations)
Answers ONLY for Assignment 5 of TAX2601 for 2023 1st semester
- Institution
- University Of South Africa (Unisa)
This document contains answers ONLY for Assignment 5 of TAX2601 for 2023 in the 1st semester
[Show more]
Seller
Follow
Content preview
Principles of TaxationTAX2601
2023 Semester 1
ASSESSMENT 3 - SOLUTION
TAX2601 is presented by:
Department of Taxation
School of Accountancy
College of Accounting Sciences
, TAX2601/2023/Semester 1/Solution to assessment 3
____________________________________________________________________________
TASK 1 (18 marks)
(a) Requirements of the GI definition:
In the case of a resident, there must be:
- A total amount (1)
- In cash or otherwise (1)
- Received by or accrued to (1)
- During the year of assessment (1)
- Excluding receipts or accruals of a capital nature (1)
[5]
(b) Discuss whether the R20 000 receipt is of a capital nature or not in terms of the
“gross income” definition as defined.
The subjective and objective tests should be used when discussing the “excluding receipts or (1)
accruals of a capital nature”.
Test
Intention on RentaGeny’s intention at the time the asset was acquired was to hold the (3)
acquisition asset as an income/rental producing asset (investment intention) and not
for speculation purposes
(CIR v Pick ‘n Pay Employee Share Purchase Trust)
Change in RentaGeny deciding to sell the Bela Bela generator and making a profit (6)
intention did not show a change in intention i.e. one from earning rental income to
speculation.
RentaGeny is entitled to realise the asset to their best advantage.
“Something more” than the mere decision to sell an asset is requiredto
bring about a change in intention.
RentaGeny did not embark on a profit-making scheme (they did not start
with a business to sell generators); they were approached by an existing
customer while their intention remained to rent out the generator.
(CIR v Stott); or
(Natal Estates)
Period for which The asset was held for just less than four years, which is a long period for (2)
the asset was held a moveable asset, thus indicating capital nature.
This could indicate a revenue nature as four years is a short time to hold
an asset, but it was always the intention to rent out the generator and
earn income from the asset.
Nature of the asset The generator was used as an income-producing asset for almost four (4)
years, indicating that it is capital in nature.
Capital is compared to a tree (that generates fruit/income) and revenue
to the fruit of the tree.
(CIR v Visser)
Conclusion It appears, based on the tests, that the sale of the generator amounts to (1)
the sale of a capital asset and not the sale of an asset to make a profit.
The R20 000 should not be included in gross income.
Marks (17)
max [13]
Total marks for Task 1 [18]
2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller pietvdw0002. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R50,00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53022 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now