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TAX2641/TAX2241 GROUP ASSIGNMENT

TAX2641/TAX2241
GROUP ASSIGNMENT
DUE DATE: 04 DECEMBER 2021
MARKS: 100
Examiner: Mr. P Rambuda Mr. NS Lithole
INSTRUCTIONS TO CANDIDATES
1. Read the following instructions carefully before answering the questions.
2. Your assignment should be typed – Arial font 12, 1.5 spacing.
3. Students must include the following:
a) Coversheet
b) Index
c) Introduction/background
d) Body
e) Conclusion/summary
f) Glossary of terms
g) Bibliography; (proof of research)
4. Use the Harvard method of referencing.
5. You must consult at least three different textbooks and preferably journals for adequate referencing. e.g. Abdel-Kader, K. and De Mooij, R., 2022. Tax Policy. How to Achieve Inclusive Growth, p.424. 6. You are expected to communicate your own thoughts. Long theoretical arguments and verbatim quotes from the text book will not earn any marks.
7. Technical requirements for assignments: Assignments must be presented in the correct format.
8. Ensure that the names of all group members are clearly indicated on the cover page of your assignment.
9. The assignment must be sent to turnitin
10. Failure to adhere to the above will result in marks being deducted.
11. Plagiarism and copying of assignments will result in the default mark 0% being awarded. This is also a punishable offence, which will lead to a disciplinary action.
QUESTION 1 50 MARKS
NB: This question consists of ten separate case studies of 5 marks each.
Bindulashu furniture’s CC
During its 2020 year of assessment Bindulashu furniture’s CC (a furniture dealer) contracted Maranga Products (Pty) Limited to repair its showroom.
Maranga Products (Pty) Limited was unable to complete the repairs on time. Maranga Products (Pty) Ltd then paid R50 000 to Bindulashu Furnishers CC (a furniture dealer) by way of compensation for the delay in repairing its showroom.
Because of the delay, Bindulashu Furnishers CC was unable to continue its showroom business. It believes that the R50 000 is a receipt of a capital in nature and is thus excluded from its gross income.
Required:
Discuss whether the R50 000 receipt is of a capital in nature. (10)
Collectors (Pty Limited
Several Collectors (Pty Limited’s customers had for one reason or another duplicated payment with the result that their accounts were in credit.
In some instances, it was unable to trace the customer and refund the overpayment. The company illegally, squared the accounts of these customers by transferring their credit balances to its sales account in its books.
Required:
Consider whether the amounts transferred by Collectors (Pty) Limited should be included in gross income. (10)
George Thulamahashe
George Thulamahashe acted as a barman at Khoroni hotel in Thohoyandou, when the regular barman was on leave. The agreement was that he would provide this service from 1 February 2020 to15 March 2020, and that he would be paid at a rate of R24 000 a month (that is R36 000 for the whole period). It was a condition of the agreement that should a stock shortage occur during this period his total pay would be a lesser amount as the hotel ‘s management may determine after deducting an amount towards the turnover lost, resulting from the shortage. His total pay (a reduced amount) was payable only on the 16th March 2020. During his period of service no shortages occurred, and R36 000 was paid to George Thulamahashe on16th March 2020
Required:
Indicate in which year, or years of assessment the R36 000 accrued to George Thulamahashe (whether actually or deemed). (10)
Melton Makushu
Melton Makushu was sued by his creditor for R6 000 being the value of goods purchased by him from the creditor. The date was five years old, and was successful in pleading in prescription. The R6000 was shown in Melton Makushu’s books as a creditor, but now that there has been a judgement, his bookkeeper would like to debit the creditor’s account. The credit entry will be made either to his capital account or to his statement of comprehensive income.
Required:
Consider the normal tax consequences to Melton Makushu of the R6000 arising out of the above event. (15)
Delmas Mudozwa
Delmas Mudozwa is a director of a private company. Director’s fees are voted annually by the shareholders shortly after the company’s financial year end. For the financial year ended 28 February 2020 the company voted him a director’s fee of R90 000.This resolution was dated 15 April 2020
Required:
Discuss the accrual for gross income purposes of Alfred Agenda’s R90 000 director’s fees. (5)
QUESTION 2 50 MARKS
In each of the following cases studies that follow a taxpayer has received an amount that may be subject to normal tax. They are all residents of the Republic
Martha Luvhimbi
During the 2021 year of assessment Martha Luvhimbi retired from the employment of VDS Bank. He was 60 years old at the time of his retirement. He was awarded R116 000 by it, R16 000 for leave due to him at the date of his retirement, and it was agreed to award him the R100 000 for the following two reasons:
a) First, as compensation for the loss of his office
b) Secondly, in return for him having agreed not to open a similar business in the Sherwood area within five years of his retirement.
In awarding the R100 000 to Martha Luvhimbi, VDS Bank stated that it was to cover both sets of circumstances. It did not consider one aspect to be important than the other.
Martha Luvhimbi has not enjoyed a retirement in the past.
Required:
Discuss whether the various amounts received by Martha Luvhimbi will be included in gross income. (20)
Ms Thivhu Muzwiriri
Ms Thivhu Muzwiriri is an art teacher and a freelance artist. She teaches at a private school from 8am to 2pm from Monday to Friday where she earns a salary of R279 000 a year. In the afternoons and evenings, she paints picture in her home studio. During the 2021 year of assessment she made a net profit of R9 000 from her home painting business. The R9 000 net profit excludes R25 000 that she received from one of her client’s that was for the sale of a painting entitled “The Dangerous”. This painting had been given to her by her close friend who was the artist for the painting as a 21st birthday present 20 years ago.” The Dangerous had been displayed in her bedroom ever since then. It was not for sale but the client was adamant that he wanted the painting. She had stated that he could have it for R25 000 never expecting him to accept. She reluctantly allowed it to go. She consoled herself with the fact that she needed the R25 000 to do the necessary repairs to her home.
Required:
Discuss whether the various amounts received Ms Thivhu Muzwiriri will be included in gross income. (10)
Marvellous Tshisole
Marvellous Tshisole is a fruit farmer in Tshakhuma. He carries on farming operations in his own name. He is also the only member of Tshiathaba CC. He formed this close corporation five years ago. Excess fruit and slightly damaged fruit are sold by him to it. Its business is the manufacture of juice (made of fruits or vegetables with sugar). During the 2021 year of assessment emoluments of R360 000 were awarded to him by it. He also paid himself R20 000 a month for the running of his fruit farming business. His sales of fruit to it during the 2021 year of assessment were R600 000.These sales were made at the market value of the excess and slightly damaged fruit.
Required:
Discuss whether the various amounts received Marvellous Tshisole will be included in gross income. (10)
Masala Mudunungu
Sister Masala Mudunungu is employed as a dental nurse by Dr Mbulu Madilonga. When she turned 25 years, her employer gave her an innocent box of imported chocolates and a harmless bowl of flowers. The imported chocolates had cost R1 000 and the flowers had cost him R750.In addition she was awarded her normal monthly salary of R22 500 and a bonus of R22 500.
Dr Mbulu Madilonga has been paying his employees a bonus during their birthday month. This system helps the employer from a cashflow perspective, and in addition by knowing their dates of birth, he then decides if he would like to give them a present.
Required:
Discuss whether the various amounts received Masala Mudunungu will be included in gross income. (10

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