09-09tax - TAX 1 MIAQE/SEPT 2009 TAXATION QUESTION 1...

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TAX 1 MIAQE/SEPT 2009 CONFIDENTIAL TAXATION QUESTION 1 (a)(i)(ii) Paper Products Sdn Bhd Year of assessment 2008 RM’000 RM’000 Tax adjustments Add(+) Deduct(-) Comments on adjustments Net profit 4,145 NA Sales Cost of goods sold 10,000 Donations not in cash -disallowed Other income 74 To be assessed separately Advertisement Condolence message 5 Private expenditure - disallowed - sec 39 Wedding announcement 10 Private expenditure - disallowed - sec 39 Bad debts Provision 100 Provision disallowed-not incurred Bad debts written off 130 Allowable Depreciation 150 Capital expense-disallowed Donation 456 Disallowed. To deduct against aggregate income Entertainment Staff refreshment Nil Business expense Ent. - dealers and suppliers 5 50% disallowed-sec39(1)(l) Promotion of sales Nil Business expense Fines and penalties 26 Non-business expenses-sec 39 Foreign exchange Loan creditor 180 Capital payments Loss on payment to trade creditor 240 Loss not realized Insurance Nil Qualifies for double deduction Lease charges Lorry Nil Commercial vehicle-lease not restricted Motor car 1 10 Payment in excess of RM 50,000 disallowed Motor car 2 Nil Allowable up to a maximum of RM 50,000 Maintenance Broken alarm system Nil Revenue expenditure Replacing main gate lock Nil Revenue expenditure Repainting of factory Nil Revenue expenditure Replacing office clock 2 Claim CA-small value assets-PR 1/2008 Professional fees Secretarial fees 6 Disallowed - IRB public ruling 6/2006 Registration of patent 5 Capital expenditure
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TAX 2 MIAQE/SEPT 2009 CONFIDENTIAL Tax audit appeal 5 Non-business expenditure Consultant fee 8 Capital expenditure Remuneration (EPF adjustments) 3.6 Max: restricted to 19% of remuneration 18,553 204 204 18,349 Less: Double deduction Insurance 10 Double deduction for marine insurance Adjusted income 8,349 Add: Balancing charge 15 Sch 3/Sec 43 8,364 Less: Capital allowance 120 Sch 3 8,244 Reinvestment allowances b/f 3 Sch 7A 8,241 Less: Unabsorbed loss b/f 10 Sec 43 8,231 Add: Other income Rent 74 Separate source of income Aggregate income 8,305 Less: Donation 56 Sec 44(6) Total income 8,249 Tax payable @ 26% = RM2,144,740 (15 marks) QUESTION 1(b) The company’s intention to construct and sell the apartments is in sync with the profit making motive. The land was specifically acquired to be developed for sale. However it was not completed on account of the government acquisition. Nevertheless, the fact that the amount paid as compensation was calculated to reflect the profit the company would have made had the development been completed is sufficiently significant to add weight to the argument for taxability. The amount received may be liable to tax as the company is already in the business of
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This note was uploaded on 11/10/2010 for the course UM ceaa1122 taught by Professor Sam during the Spring '10 term at Calumet College.

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09-09tax - TAX 1 MIAQE/SEPT 2009 TAXATION QUESTION 1...

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