PINV05B-2014-6-E-1 - UNIVERSITY EXAMINATIONS N I SA U Elmwm...

Info icon This preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: UNIVERSITY EXAMINATIONS UNIVERSITEITSEKSAMENS N I SA : U Elmwm PINV05B May/June 2014 TAX PLANNING FOR INVESTMENTS Duration 2 Hours 70 Marks EXAMINERS FIRST PROF AC ENGELBRECHT SECOND PROF GK GOLDSWAIN ——'-——'-—'—_—'—'—_F—-—_—l—u—_—_———_— Use of a non-programmable pocket calculator I5 permissible Closed book examrnatlon This examanatlon question paper remains the property of the UniverSIty of South Africa and may not be removed from the examination venue (a) This. examlnatlon paper consrsts of TWO SECTIONS (b) ThIS examination paper consrsts of SEVEN PAGES including thus page (0) Answer & questlons In thlS paper (both SECtIOl’lS) [TURN OVER] 2 PINvosB MayIJune 2014 SECTION A: Multiple Choice Questions Total Marks: 30 Instructions: l Answer ALL of the followrng multiple chorce questions in Section A in your answer book Please note You must not fill in a mark reading sheet You merely have to indicate the number of the MOST correct alternative next to the question number < Write your answers legibly 1 The income arrsrng from a donation by a parent, married out of community of property. to a child of 16 years old, that has been invested in an interest bearing deposrt, Will be taxed In the hands of A The 16 year old Child 13 The parent who donated the amount that was invested C A trust D Equally in the parent’s and in the child’s hands E The parent can choose in whose hands the amount is to be taxed (3) 2 When IS the fiscal (tax) year-end of a partnership? 3b The partnershrp does not have a fiscal year—end as it is not a person as defined In the Income Tax Act 28 February each year 30 June each year 31 December each year Any time of the year that the partnership chooses (3) ”10003 3 The meaning of “received by” as used in the definition of “gross income” IS not defined in the Income Tax Act Rather Its meaning IS determined according to The meaning attributed to it in the Oxford English Dictionary The meaning attributed to it In the Collins English Dictionary The meaning attributed to It in the Tax Administration Act The meaning attributed to it by case law Some other definition (3) {1100013} [TURN OVER] 3 PINVOSB Maleune 2014 4 Proceeds arIsmg from Illegal actIVItIes are A Never taxable as It Is an Immoral actIVIty and by taxmg such proceeds SARS would also be actIng Immorally and be seen to be encouragIng Immoral behaVIour B Only taxable If the taxpayer discloses the proceeds of the Illegal actIVItIes to SARS Only taxable Is SARS finds out about the Illegal actIVItIes Only taxable where cash Is stolen Always taxable (3) ITIUO 5 Mr Tyson runs hIs own debt collectIng agency for the optometrIst professmn Where outstandmg amounts can neIther be collected from the patent nor any medIcal aId fund, his clIents referthese cases to mm for "speCIal" attentIon Due to the pure SIze of the man, hIs success rate has surprIsed many clIents HIs standard contract WIth hIs clIents stIpulates that he Is entItled to 20% of all amounts collected from patlents that have been referred to mm The followmg Information relates to referred cases for the year of assessment under reVIew R Total value of referred cases 460 000 Amounts paId dIrectly to clIents by patients (after “speCIal” attentIon) 100 000 Amounts collected by Mr Tyson dIrectly 220 000 PromIses In respect of future payments to be made 80 000 CollectIon fees already recered by Mr Tyson from clIents 50 000 What IS Mr Tyson’s gross Income for the current year of assessment? A R92 000 B R90 000 C R80 000 D R64 000 E R44 000 (3) 6 lndIcate thch of the followmg tests would establIsh whether a natural person WIII be treated as a reSIdent of the RepubIIc for normal tax purposes A A person who has a valId IdentIty document (ID) Issued by the Department of Home AffaIrs A person who has a valId passport Issued by the Department of Home AffaIrs A person who has a valId IdentIty document as well as a valId passport Issued by the Department of Home AffaIrs A person who has a vaIId IdentIty document Issued by the Department of Home AffaIrs as well as a foreign passport A person who Is eIther ordInarIly reSIdent In the Republlc or was phySIcally present In the Republlc for the reqUIred number of days as speCIerd In sectIon 1 of the Income Tax Act (3) 0003 ITI [TURN OVER] 4 PINVOSB Maleune 2014 7 Indicate Wthh of the followmg assets wrll not be treated as a personal-use asset of a natural person for the purposes of capital gains tax (CGT) Private motor vehlcle Private jewellery Boat not exceedlng 10 metres In length Private collection of gold corns None of the above (3) ITIUOUJ3> 8 indicate Wthh of the followmg busmess expenses should normally qualify for deduction under the general deduction formula A Purchases of tradmg stock 8 Interest on overdraft faCIIIty to fund working capltal C Entertainment expenses D Salaries and wages paid to employees E All of the above (3) 9 Indicate Wthh of the followrng rs not a “8th suspect trade for the purposes of the rmg-fencnng of assessed losses (sectron 20A) Any retailing business carried on by the taxpayer or hlS relative Any sport practiced by the taxpayer or hlS relative Any dealing In collectibles by the taxpayer or hIS relatlve Any animal showmg by the taxpayer or hlS relative Any form of gamblmg or betting practiced by the taxpayer or hlS relative (3) ITIUOCD)" 10 Indicate the rate at which donations tax IS payable on donations not qualifying for exemption A 0% B 10% C 14% D 20% E 25% (3) END OF SECTION A [TURN OVER] 5 PINVOSB Maleune 2014 SECTION B Total Marks: 40 Instructions I Answer ALL of the followang questlons In your answer book Show all calculatIons and motIvate your answer, where reqUIred 1 1 The followmg Informatlon was extracted from the accountIng records of a taxpayer Incl VAT Excl VAT 3 3 Sales 228 000 200 000 Purchases 171 000 150 000 OpenIng stock 22 800 20 000 Closmg stock 34 200 30 000 IndIcate the way In thch each of these Items wrll Impact on the calculatlon of the taxabie Income forthIs taxpayer who Is a regIstered vendor, solely makIng taxable supplIes for VAT purposes Also IndIcate the amounts that would respectlvely have to be taken Into account for such purposes (6) 12 Can a taxpayer legItImately reduce hIs normal tax IIabIIIty for the current year of assessment by makIng prepayments In respect of Insurance premrums due only In respect of the next year of assessment and, If so, are there any statutory lImItatIons WIthIn Much the taxpayer should stay In orderto successfully claIm such prepayments as a deductIon for the current year of assessment? (4) 13 A salarIed taxpayer purchased a prIvate reSIdence In Johannesburg some five years ago for R1,5 mI|lIon As he successfully appIIed for a neWJob In Durban, he sold the reSIdence In Johannesburg for R2,2 mIIIIon durIng the current year of assessment and used the proceeds to acqwre a new reSIdence In Durban for R2,5 mIIIIon You are reqUIred to answer the followmg questlons In the regard 1 IndIcate the amount, If any, that WIll have to be Included In the taxpayer's gross Income MotIvate your answer (3) 2 IndIcate the amount, If any, that can quaIIfy for a deductIon In terms of the general deductIon formula MotIvate your answer (2) 3 IndIcate the amount, If any, that can qualIfy for a speCIal deductlon or allowance MotIvate your answer (2) [TURN OVER] 14 15 16 6 PINvosa MayIJune 2014 4 IndIoate the amount, If any, that w1|l have to be taken Into account for the purposes of the capItaI gaIn reaIIsed as well as the taxable capItal gaIn for the taxpayer Show your calculatIon and motIvate your answer Assume that thus Is the only capItal gaIn realIsed by the taxpayer durIng thIs year of assessment (3) A company has Incurred expendIture In movmg the followmg Items from Its old manufactunng premIses to Its new premIses B TradIng stock 10 000 New machInery (achIred and held as a capItal asset) 15 000 Does the company quaIIfy for any deductIon and/or allowance WIth regards to the movrng costs Incurred? MotIvate your answer and, If It should quallfy, IndIcate the extent of the deductIon and/or allowance to be claImed durIng the year of Incurral Ignore any value-added tax (4) A company has used a vehIcle for the purposes of Its busmess and deCIded to sell We vehIcle durIng the current year of assessment The followmg partrculars relate to the vehIcle 3 Cost of acquismon 60 000 Wear and tear allowances claImed In total up to date of sale 20 000 Proceeds on dISposal 80 000 Calculate the recoupment and capItal gaIn respectIvely (If any) that the company needs to account for. Show your full calculatIons and ignore any value-added tax as well as the pOSSIbIIIty of deferrIng the recoupment and applying the roll-over prOVISIons for the capItal gaIn (6) A natural person, who Is taxed at the maXImum margInaI rate of tax, has been offered two alternatlves to Invest In The followrng InformatIon relate to the Income that can be earned as well as the tax to be paId In respect thereof Income Tax payable 3 3 Local dIVIdends 100 000 15 000 Local Interest 120 000 30 000 DIVIdends tax of 15% Is payable on the dIvrdends to be earned whlle normal tax WIII be payable (after quaIIfyIng for a IImIted exemptIon) In respect of the Interest AdVIse the taxpayer thch Investment he should opt for, based upon the above Informatlon (3) [TURN OVER] 17 18 7 PlNVDSB Maleune 2014 Indicate how a “small busrness corporation” would garn from a normal tax perspective If compared to a company that rs not recognised as such (3) Mr Dend earned the followmg amounts durtng the current year of assessment He Is 50 years old and unmarried 3 Share of profits from a partnershrp 200 000 Interest earned on SEWII'IQS account 35 000 Local drvrdends received 10 000 He has contributed R60 000 to a retirement annurty fund during the current year of assessment He has no other expenses Calculate hrs taxable Income for the current year of assessment (4) END OF EXAMINATION PAPER UNISA 2014 ...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern