Q%20and%20A%20ch%20%2006-all

Q%20and%20A%20ch%20%2006-all - 14 edition Question 6-1(1 Mr...

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14 edition Question 6-1 (1 ) Mr. Lee owns a residential flat which was let to Mr. Chan who failed to pay rent from October -2 onwards. Mr. Lee regained possession of the flat on 1 April -1. The flat was vacant until 1 July -1 when Mr. Lee entered into a five-year tenancy agreement with Mr. Cheung on the following terms: (a) duration of the tenancy: 1 July year -1 to 30 June year 4 (b) lump-sum premium payable on 1 July -1: $180,000 (c) monthly consideration: $10,000 ($9,000 for rental and $1,000 for the use of air- conditioning unit and furniture) payable on the first day of each month (d) rates were payable by Mr. Lee All the payments due in the year of assessment year 0 and year 1 were duly made. On 1 January year 0, the assessor wrote to Mr. Lee advising him that he was satisfied that rents amounting to $72,000 which had previously been assessed in the year -2 assessment had now become bad. Half of this amount was eventually recovered by Mr. Lee in February year 1 . The annual amount of rates paid by Mr. Lee for the flat was $3,000 and $4,000 for the year of assessment year 0 and year 1 respectively. Required :- compute the property tax for year 0 and year 1 (9 marks) Ans: Mr. Lee Property tax assessment Year of assessment Year 0 Year of assessment Year 1 Basic period: Year ended 31 March year 0 Year ended 31 March year 1 $ $ Rent received in the year (a) 90,000 120,000 Premium (b) 45,000 (c) 60,000 Recovery of bad debts - 36,000 135,000 216,000 Less: Irrecoverable consideration attributable to previous year (s 7C) 72,000 _______ Assessable value (ss 5B and 7C) 63,000 216,000 Less: Rate paid 3,000 4,000 60,000 212,000 Less: Statutory allowance for repairs (20%) 12,000 42,400 Net assessable value 48,000 169,600 Property tax at 15% 7,200 25,440 KSK/ch: DoraCh06.doc (Last update: 9/29/2011) Page 1
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Notes: (a) Rent for the nine months from July year 0 to 31 March year 0: $10,000 x 9 = $90,000 (b) The premium is to be spread evenly over a three-year period commencing on 1 July year 0 (s 5B (4)). Premium for the year of assessment year 0: $180,000 x 9/36 = $45,000 (c) Premium for the year of assessment year 1: $180,000 x 12/36 = $60,000.
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