Question

Question 1

During the 2020 year of assessment Harley Davidson (married out of community of property), a resident of the Republic, made the following donations ( assume that all legal formalities were complied with at the date of each donation):

 

1.    On 1 March 2019 he gave his wife, Pearl, a pair of diamond earrings valued at R 25 000.

2.    On 25 April 2019, he gave his youngest son, Carl, the lifetime usufruct on this date was R 1 356 000.

3.    On 1 July 2019 he gave R 50 000 to qualifying university( an approved public. Benefit Organisation as referred to in section 10 (1) (cN) of the Income Tx Act).

4.    On 24 December 2019, Harley gave his driver, Larry, a bonus of R30 000. This was to acknowledge his many years of hard and loyalty to the Davidson family.

5.    On 1 January 2020, Harley have an amount od R60 000 to his widowed mother.The commissioner of SARS considers this to be a bona fide contribution to maintenance and regards the amount as reasonable.

6.    on 10 Jan 2020 he gave his daughter, Betsy an annuity of R 7 000 per annum for 10 years. The Commissioner does not regard this as a bona fide contribution to maintenance. The value of the annuity on this date was R 39 550.

7.    On 1 Feb 2020, Harley sold his truck which was valued at R 100 000 to his nephew, Lad, for R 75 000, in order to help him start his business.

8.    Harley owned a vintage motorcycle. On 15 Feb 2020, he donated the motorcycle, valued at R150 000 to his eldest son Josh, on condition that ownership would only pass to him when Harley died.

 

Requires: Calculate the donations tax payable on each of the above - mentioned transactions made during the 2020 year of assessment. Show all working and where there is an exemption applicable, clearly state as such. (15 marks)

 

 

 

 

 

 

 

 

 

 

Question 2

John Doe, a resident of south Africa, passed away after suffering fatal heart attack at age 68, John was married to Jane Doe, Their marriage was registered under an ante-nuptial contract, subject to the accrual system.

The following information relates to the assets and liabilities in john’s estate:

 

1.       A house, valued at R6 000 000, situated in Cape Town. This is where John resided with his wife Jane. The house originally purchased for R3 500 000.In terms of his last will and testament, this house was left to Jane.

2.       A holiday apartment situated in Durban, Valued at R2 500 000 at the date of John’s death. The apartment was originally purchased for R 1 800 000. John left the apartment to his daughter , Jessica.

3.       A BMW X5, valued at R 950 000, was left to his son, Joshua.

4.       A collection of antique furniture, valued at R 1 300 000 was left to john’s sister, Kerry.

5.       John’s investment, cash on hand and bank balances at the date of his death amounted to R 5 150 000, of which half was left to Jane.

6.       The following amounts were still awing to south African banks in respect of the assets owned by John at the date of his death:

a.       Holiday apartment in Durban – R250 000

b.      BMW X5 – R65 000

7. Funeral and tombstone expenses amounted to R95 000.

8.Jan’s accrual calm against the estate was R 1 250 000.

 Required: Compute the estate duly payable by John Doe’s estate. (15 MARKS)

 

 

 

 

 

 

 

 

 Question 3

Nandi Majola (aged 35) is a resident of the Republic. Nandi is currently employed as an audit manager at Ernest & old (pty) Ltd. The following information relates to Nandi for the year of assessment ended 29 Feb 2020:

1.       Nandi earned a gross salary of R60 000 per month for the 2020 year assessment. On 15 Dec 2019, she received a gross bonus of R80 000.

 

2.       During the 2020 year of assessment, Nandi contributed a total of R57 600 towards the Ernest & old pension Fund. Ernest & old contributed a further R72 000 on her behalf.

 

 

3.       Ernest & old (pty) ltd contributed R2 200 per month for Nandi’s membership of a medical scheme. Nandi is single, and has no dependents. During the 2020 year of assessment, Nandi underwent a procedure which she paid R25 000for, as it was not covered by her medical aid. Nandi does not a disability as defined.

 

4.       Nandi receives a monthly travel allowance of R3 000 for using for own car to travel to client premises during audits. Nandi pays all the expenses for the car but has not kept accurate records of her expenditure for the 2020year of assessment. She has maintained a logbook which reflects that her total distance travelled for the year was 50 000 kilometers, with total business travel amounting to 18 000 kilometers. Nandi’s car cost R275 000  (including VAT)

 

 

5.       Nandi enjoyed a 10-day holiday at the Drakensburg Gardens Resort. Ernest and Old (pty) Ltd owns a time –share scheme in the resort and allows managers to utilize this benefit at no charge. The holiday accommodation could normally be let at a rate of R950 per day.

 

6.       Nandi spent a total of 20 days away from home when she was sent to assist on an out-of-town audit/ Ernest & Old (pty) Ltd provided her with an allowance of R 600 per day to cover meals and incidental costs. Nandi has not kept records of her actual expenditure.

7.       Nandi’s employer withheld R218 204 as employee’s tax from her remuneration for the 2020 year of assessment.

Required:

Calculate Nandi’s net tax payable to / refundable by SARS FOR THE YEAR OF ASSESSMNET ENDED 29 Feb 2020. Assume remuneration of R936 700 for the purposes of calculating Nandi’s pension fund deduction. Round off to the nearest Rand. (30 marks)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question 4

 Toys4All (Pty) ltd (“Toys4All or the company”) is a registered Value –Added Tax (VAT) vendor and has a two-month tax period. Toys4All operates as a wholesaler of toys that are supplied both local and foreign retailers.

The following income and expenditure amounts, inclusive of vat where applicable, have been generated for the tax period 1 Jan 2020 to 29 Feb 2020:

	R
INCOME
Local sales	1,524,900
Export sales	250,000
Interest on loan to a resident subsidiary company	3,450
Bad debts recovered (note1)	23,250
Insurance payout (note 2)	164,800
EXPENDITURE
Purchases of trading stock (note3)	455,400
Salaries	120,000
Petrol	6,500
Motor car repairs and maintenance	2,645
Motor car purchased (note 4)	240,000
Insurance (note5)	7,935
Bad debt written off (note 6)	7,880
Interest on overdraft	2,150
Bank charges	805
Rentals (note7)	5,750
Water and electricity	6,900

 

NOTES

1.       Two debtors that have been written off in previous tax periods were recovered by Toys4All during its current tax period.

·         R 17 250 was recovered from Kid Co (pty) ltd (a local retailer) relating to a sale made in April 2019, and

·         R6 000 was recovered from Coco Inc (an export debtor) relating to sales made in May 2019.

2.       Two indemnity awards were received from the company’s insurer during the current tax period:

·         R 105 000 was received for the loss of the managing director’s company car ( a motor car) which was stolen from outside his home in December 2019. It had a nil carrying amount in the accounting records in Toys4All when it was stolen.

·         R59 800 was received for a batch of trading stock that was stolen a delivery vehicle transporting goods to a local customer in Johannesburg (South Africa) was hijacked. The delivery vehicle belonged to a transport contractor used by it to transport its goods.

3.       All purchases are from registered VAT vendors.

4.       A new motor car was purchased by the company on 1 Feb 2020 to replace the managing director’s company car that stolen (note2). The motor car cost R240 000 (including VAT). The managing director has not yet been granted use of the car as he was on leave for the month of Feb 2020. It is currently being used for general purposes within the business.

5.       The insurance expense includes an amount of R850 relating to the insurance on the new motor car ( note4).

6.       The bad debt written off for R7 880 was for an amount owing by Humleys Plc (an export customer) for goods shipped to the company in London in June 2019. Toys4All has been unable to recover the debt since Hmleys Plc was liquidated.

7.       The rental is broken down as follows:

Rental of printers                                             4 600

Rental of water coolers for staff                1 150

 

Required:

Calculate the VAT payable by, or refundable to Toys4All (pty) ltd for its tax period 1 Jan 2020 to 29 Feb 2020. Where there are no VAT consequences, provide a brief reason why. A VAT rate of 15% applied throughout the applicable tax period on standard-rated good and services. (20 x 2 = 40 marks)