Exam (elaborations)
TAX2601 Assignment 3.
- Course
- Principles of Taxation
- Institution
- University Of South Africa
TAX2601 Assignment 3.
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TAX2601Assignment 3
ADMIN
[COMPANY NAME]
, QUESTION 1 PART A Health Harmony (Pty) Ltd (“HH”) is a company offering
various health and wellness services and sells health supplements. The
company is situated in Johannesburg and its financial year ends on 31 March
2023. HH owns a 25% shareholding in another company specialising in
organic juices, OJuicy (Pty) Ltd (“OJuicy”). HH is not a small business
corporation as defined in section 12E the Income Tax Act. The company
accountant calculated the preliminary taxable income as R6 785 000. You
may assume that this amount is correctly calculated, however, the items listed
below still needs to be taken into account: The following information is
provided: Notes R Calculated taxable income 6 785 000 Dividends received 1
50 000 Rental income 2 ? Inventory 3 ? Marketing expense 4 90 000 Patents
& related costs 5 95 000 Bad debts 6 71 000 Restraint of trade 7 1 000 000
Notes: 1. Dividends received OJuicy declared and paid dividends to its
shareholders on 15 March 2023. HH’s 25% share of the gross dividend
amounted to R50 000. (You may ignore dividends tax). 2. Rental income &
improvements A lease agreement was entered into on 1 July 2022 between a
personal trainer (a natural person) and HH whereby the trainer will pay R15
000 monthly rent to use office space in HH’s property from 1 July 2022. In
terms of the agreement, the trainer needed to make improvements to the
space for an amount of R100 000. The improvements were all effected by the
trainer and brought into use by 31 January 2023 at a cost of R130 000.
TAX2601/2023/Semester 2/Assessment 3
To calculate Health Harmony (Pty) Ltd's taxable income for the financial year
ending on 31 March 2023, we need to consider the provided information and
make adjustments to the preliminary taxable income of R6,785,000. Here
are the adjustments needed for the items you mentioned:
1. Dividends Received:
HH received dividends from OJuicy in the amount of R50,000.
Adjusted Taxable Income = Preliminary Taxable Income (R6,785,000) +
Dividends Received (R50,000)
2. Rental Income & Improvements:
HH received rental income from leasing office space to a personal
trainer.
The trainer made improvements to the space at a cost of R130,000.
The rental income and improvements should be considered for taxation:
Rental Income: R15,000 per month from 1 July 2022 to 31 March 2023
(9 months).
Total Rental Income = R15,000 * 9 months = R135,000
Adjusted Taxable Income = Preliminary Taxable Income (R6,785,000) +
Dividends Received (R50,000) + Rental Income (R135,000)
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