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2016/08/211Study unit 2: Administration, returns and assessmentsLearning unit 5: Trading deductions and trading stock2Background•Companies incur certain expenses in the running ofthe business•Could be deductible from income•Lowers taxable income•The more tax deductions taxpayers can claim -reduces taxable income and less tax to be paid•Deductions for tax and accounting purposes candiffer in certain situations•The act provides for a general deductible expenses,specific deductions and prohibited deductions3The general deduction formula (section 11(a) and section 23 (g)Section 11(a)•Anypersoncarryingonanytradeshallbealloweddeductions derived from:- Expenditure or losses- Actually incurred- During the year of assessment- In the production of income- Not of a capital nature.Section 23(g) prohibits the deduction of-Any money claimed as a deduction-To the extend which it was not laid or expended for tradepurposes4
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