UNIVERSITY OF LIMPOPO

TURFLOOP CAMPUS

FACULTY OF MANAGEMENT & LAW

SCHOOL OF ACCOUNTANCY

DEPARTMENT OF TAXATION

DEGREE AND DIPLOMA AUGUST : 2017

MODULE: CTAA022
(TAXATION)

TIME: 2 HOURS MARKS : 80

INTERNAL EXAMINERS : MR WASARA

INTERNAL MODERATOR : Ms. M.S NGOETJANA CA (SA)

THIS PAPER CONSISTS OF …5…PAGES INCLUDING COVER PAGE

INSTRUCTIONS:

1. Answer all the questions

2. Write neatly and legibly
3. Round all answers to the nearest rand
 CTAA022 SEMESTER TEST 1 2017

Question 1 22 marks
1. What is gross income in terms of resident? (3)
2. What is exempt income and provide three reasons for exempting income from tax as well as
three examples of exemptions? (7)
3. Name three organizations that are exempted from paying tax? (3)
4. For the purposes of determining taxable income certain amount will be allowed as a tax
deductions in terms of the Act, you are required to state requirements of general deduction
formula section 11(a) (5)
5. A resident is defined in section 1 (other than a natural person) of the Income Tax Act. Provide
this definition. (4)

Question 2 12 marks

2.1 Match the following court cases (column A) with the principle in column B (4)

Column A (Court Case) Column B (Principle)

1 Cohen A Fruit and tree comparison

2 Kuttel B The term amount must be given a wider meaning

3 Lategan C A person is ordinarily resident in the country to which he intends to

return from all his wanderings

4 Visser D A person is ordinarily resident where the person’s principal

residence is his or her real home is

2.2 Name the court case (Column A) that matches the principle in column B (4)

Column A (Court Case) Column B (Principle)

1. An amount is only received and included in gross income if it is

received by you for your own benefit

2. Accrual occurs when you are unconditionally to have an amount

2.3 State the principle (Column B) that matches the court case in column A (4)

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 CTAA022 SEMESTER TEST 1 2017

Column A (Court Case) Column B (Principle)

1 Brother Bros

2 Peoples Stores

Question 3 30 marks
Bidvast (Pty) Ltd, is a resident in the Republic and is a company that manufactures wooden furniture
and has a year end 31 December 2017.
For the 2017 year of assessment, Bidvast (Pty) Ltd earn the following income:
R
Sales from selling wooden furniture………………………………………………………………….180
0000
Profit on sale of an asset ………………………………………………………………………………130
000
Dividends from South African companies…………………………………………………………….. 20
000
Interest from South African bank………………………………………………………………………..15
000
Rentals from property letting…………………………………………………………………………...220
000
Interest from Australia Bank……………………………………………………………………………..40
000
Foreign dividends-Bidvast holds 15% of the total equity shares from USAA (Pty) Ltd (USA)….100 000
- Bidvast holds 5% of the total equity shares in ZimCo (Pty) Ltd (ZIM)……......50
000
- Bidvast owns 7% of the shares and voting rights in Goo (Pty) Ltd (UK)
Goo (Pty) Ltd is listed on JSE as well as the New York Stock Exchange......70
000
Taxable capital gain (correctly calculated)…………………………………………………………….10 000
Bidvast (Pty) Ltd incurred the following expenditures:
Raw materials………………….
………………………………………………………………………….60 000

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 CTAA022 SEMESTER TEST 1 2017

Delivery expense (general)……………………………………………………....................................44

000
Marketing and advertising ………………………………………………………………………………38 000
Acquisition of delivery vehicle (on 31 Dec 2017)……………………………………………………
246 000
Rates and taxes (rental property) ………………………………………………………………………25
000
Salaries and wages………………………………………………………………………………………30 000
Traffic fines …………………………………………………………………………………………………1
500
Electricity…………………………………………………………………………………………………..40
000

You are required to: Marks

Compute normal tax liability of Bidvast (Pty) for the year of assessment 31 December 30
2017. Provide brief reasons where the amount is Rnil and where the amount is
exempted. (Using the framework for determining taxable income)

Question 4 16 Marks
PART A
Gafa (Pty) Ltd “hereafter Gafa) is a South African company owns various investment properties in the
Republic from which it earns rental income. Gafa has year of assessment 30 June 2017. The rental
agreement states that the rental of R5 000 should be paid on monthly basis at the beginning of the
month.
Mr. Goodpayer, a tenant in one of these properties departed on an extended visit to Egypt and on 28
June 2017 paid an amount of R15 000 into the bank account of Gafa. This amount represented the
rental due in respect of the next three months as the tenant would find himself outside the borders of
the Republic during such period.

You are required to: Marks

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 CTAA022 SEMESTER TEST 1 2017

Discuss with reference to the court cases whether R15 000 above is received by or 6
accrued to Gafa and whether it should be included in the gross income.

PART B
You are a trainee at the tax consultant firm called TaxGuru Inc. which specializes in tax advisory. You
have been assigned by your supervisor Ms. Lovertax CA (SA) to provide a feedback to the follow
email by providing reasons whether the persons involved are connected persons as defined in the
Income Tax Act.
Email 1

1. Cooler (Pty) Ltd and Hotty (Pty) Ltd are both controlled and managed by the same person. (2)
2. HpCo (Pty) Ltd holds 15% of the equity shares in LimCo (Pty) Ltd. (2)
3. Mr. Methias is the Executive Director of Wax (Pty) Ltd and hold 12% equity shares, while his
daughter holds 15% equity shares in Wax (Pty) Ltd. (2)
4. Mr. Souljah holds 30% of equity shares in Dickson (Pty) Ltd and other shareholders hold less
than 15% equity shares each in Dickson (Pty) Ltd. Is Mr. Souljah a connected person? (2)
5. Mkokotlong (Pty) Ltd holds 25% equity shares and voting rights in Memeza (Pty) Ltd.
However, other shareholder holds 56% equity shares and voting rights in Memeza (Pty) Ltd. Is
Mkokotlong (Pty) Ltd a connected person?
(2)

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