Question

Harald Dunn and his wife Evadne operate a successful snack packaging business, Healthy Snacks, in St Mary, Jamaica. The bulk buying of the raw materials (nuts, dried fruits, etc), the packaging and delivery to corporate area shops are done by the members of the family.

The accounts for Mr. Dunn’s business at 31st December 2014 showed a profit of $4,500,000 after charging:

• $180,000 depreciation of equipment and office furniture;

• $750,000 for salary to his wife Evadne who supervises the office, $496,000 to his 18 year old son Shane, and $1,720,000 to himself.

• $78,000 interest on a loan he had obtained to expand his business 3 years ago

(a) Prepare a statement; with notes where applicable; of the Healthy Snacks business showing the taxable profits and income tax liability for the year of assessment 2014 for Harold Dunn

(b) Shane is a part-time student at the University of the West Indies. What is his tax liability, if any?

Source: Mendes, Margaret, McLean, Rachael & Finnikin, Georgia: Essentials of Jamaican Taxation, 5th Edition, pages 225-226

Answer 1

Page 1 Answer: Harald Dum and his wife Evadne operate a successful Snack packaging business, Healthy snacks in st Marry, Jamica. The taxable prefits and income tax liability for the year of assessment 2014 for Harold Dunn. Particulars Amount Net profit $4500000 Add: Salary to son $ 496000 Taxable income $4996000 Total Tax liability (64996000x 25%) $1249000 Note: Salwey toson Non allowable expenses Allowable expenses: Depreciation of equipment and office furniture salary to his wife Evadne, Salary to self, interest on a loan.