Exam (elaborations)
TAX2601 EXAM PACK 2025 {DETAILED QUESTIONS AND ANSWERS }
- Course
- Principles of Taxation
- Institution
- University Of South Africa
TAX2601 EXAM PACK 2025 {DETAILED QUESTIONS AND ANSWERS }
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2 TAX2601/201
SOLUTIONS TO THE QUESTIONS ARE PROVIDED
QUESTION 1 (25 marks, 30 minutes)
QUESTION 1(a) (10 marks, 12 minutes)
Dinepe Fela (Pty) Ltd (Dinepe) is a South African company that sells contemporary art. Dinepe’s financial
year ends on 31 March. On 28 March 2014 they sold an artwork worth R10 000 to an advertising company. The
advertising company bought the artwork to hang in their reception area. Instead of paying cash for the artwork,
the advertising company offered Dinepe an advertising campaign also worth R10 000. On 30 March 2014,
Dinepe accepted the advertising campaign instead of cash. The campaign would consist of 10 monthly
advertisements in a local newspaper, commencing during April 2014.
REQUIRED: MARKS
Discuss whether the receipt of the advertising campaign would constitute gross
income of Dinepe Fela (Pty) Ltd as defined in the Income Tax Act 58 of 1962 for the 10
year ending 31 March 2014.
QUESTION 1(b) (15 marks, 18 minutes)
Dikoloto Fela (Pty) Ltd (Dikoloto) is a residential property developer with a March year-end. Dikoloto’s main
business is selling residential property in the form of freestanding full-title homes, sectional title townhouses
and full-title stands.
On 13 October 2013, hurricane Sally struck one of the towns in which Dikoloto operates and destroyed four
unsold townhouses with an original cost of R4 500 000 in total. The insurance company paid Dikoloto R3 900
000 in respect of this loss.
REQUIRED: MARKS
Discuss whether the expenditure and/or losses above are deductible by Dikoloto Fela
(Pty) Ltd in terms of the general deduction formula (s 11(a) read with s 23) for the year 15
of assessment ending 31 March 2014. Where applicable, briefly make reference to the
applicable case law.
QUESTION 2 (15 marks, 18 minutes)
QUESTION 2(a) (10 marks, 12 minutes)
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Sunshine (Pty) Ltd is not a small business corporation as defined. Its year of assessment ends on 31 March each
year. Its records show the following:
Tax year Taxable Date of assessment
income
2012 R1 200 000 4 April 2013
2013 R1 354 980 15 September 2013
2014 R1 784 432 (estimated - not yet assessed)
REQUIRED: MARKS
a) Calculate the first and second provisional tax payments for the 2014 year of
assessment. Clearly state on which date the payment must be made. 9
b) For the first provisional tax payment for the 2014 year of assessment, what will
the basic amount be if the 2013 assessment was issued on 15 June 2013? 1
QUESTION 2(b) (5 marks, 6 minutes)
Majuba (Pty) Ltd was issued its 2013 ITA34 tax assessment on 31 January 2014. The accountant of Majuba (Pty)
Ltd has reviewed the issued assessment and disagrees with the disallowance of a capital allowance claimed of
R15 500. The ITA34 reflects an amount of R6 875 due to SARS, payable on/before 31 March 2014. The
accountant submitted an objection against the issued tax assessment on 4 February 2014 and SARS declined the
objection on 15 March 2014.
REQUIRED: MARKS
Discuss what procedures, if any, Majuba (Pty) Ltd can follow to rectify the incorrect
2013-tax assessment. 5
QUESTION 3 (25 marks, 30 minutes)
Lazy Age CC is a small business corporation as defined and carries on business as a cosmetics product
manufacturer. The close corporation operates mainly in Johannesburg and sells most of its cosmetics products
on credit to retailers in South Africa. It has only one member, Jenny Levin.
The following information is provided to you for the close corporation’s year of assessment ended 28
February 2014:
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R
1. Sales – cash 450 000
Sales – credit 5 025 000
2. Purchases – cash and credit 3 587 150
3. Inventory at cost – 1 March 2013 290 000
4. Inventory at cost – 28 February 2014 330 000
5. Bad debts written off 119 000
6. Doubtful debts allowance, allowed by SARS for the 2013 year of 12 500 assessment
7. List of doubtful debts at 28 February 2014 93 800
8. Personnel costs:
- Salaries and wages (as approved by the Commissioner) 650 000
- Contributions to pension fund on behalf of employees 125 850
9. On 30 April 2013, Lazy Age CC received a letter from Quick Attorneys regarding alleged facial
damages caused by one of its night creams to the
upper cheek of Amy Kumalo, a super model for Paris on the Vaal. She is claiming
R1 500 000 for a loss of income from Lazy Age CC. The case went to court and
the court ordered Lazy Age CC to pay Amy R1 000 000 for her loss of income on
31 March 2014.
10. Legal expenses incurred:
- Legal cost relating to the Amy Kumalo case (refer note 9) 6 000
- Legal cost paid on behalf of Jenny Levin 1 275
11. Advertising cost:
- Cost of advertising a vacant post in the Daily Informer 3 750
- Cost of erecting a billboard close to the local airport 25 850
12. Lazy Age CC owns the following capital assets:
- A new cosmetics manufacturing machine D was purchased on
31 January 2014 at a total cost of R300 000 and was brought into use on the
same date.
- A second-hand delivery vehicle was purchased on 31 July 2012 at a total cost of
R85 000 to deliver the cosmetics products of Lazy Age CC to its clients.
The delivery vehicle was only brought into use on 1 September 2012.
- A manufacturing building was erected on 30 June 2010 and brought into use on
31 August 2010 at a total cost of R1 250 000. The building houses the whole
cosmetics manufacturing process of Lazy Age CC.
13. Lazy Age CC sold technologically outdated manufacturing machinery Z for
R20 000. It was originally bought second-hand on 30 April 2010 for R100 000 and
brought into use on the same day.
QUESTION 3 (continued)
R
14. The following costs were incurred relating to trademarks:
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