Question

Property X The property was let to Mr Chen on 1 July 2017 for a term of 2 years at a monthly rent of $8,000. According to the tenancy agreement, the tenant was liable to pay the rates and management fees while the landlord was liable for repairs. Mr Chen had also paid for repairs of $2,000 on 1 April 2019. Mr Chen moved out from the property upon expiry of the lease and received back the rent deposit of $8,000 from Mr Chu. The property was then occupied by Mr Lee’s family on 16 July 2019. Mr Lee is the sonin-law of Mr Chu. Mr Chu did not demand any rent from Mr Lee, but Mr Lee was required to pay the mortgage loan instalments and the related expenses on the property. Mr Lee paid the following items during the year ended 31 March 2020:

(i) mortgage loan instalments of $36,000;

(ii) rates of $900 per quarter;

(iii) monthly management fee of $500; and

(iv) repairs of $5,000.

Property Y This property was occupied by Mr Chu as his residence. During the year ended 31 March 2020, Mr Chu paid the following expenses:

(i) rates of $1,200 per quarter;

(ii) management fee of $700 per month; and

(iii) mortgage loan interest of $50,000.

Property Z This property was let to Mr Ho on 1 January 2017 for a term of 3 years at a monthly rent of $10,000. Rates ($1,500 per quarter) was paid by Mr Chu. Starting from 1 February 2019, Mr Ho did not pay any rent. Mr Ho moved out from the property on 31 May 2019 and was untraceable. The property was then let to Mr Ma on 1 July 2019 for a term of 2 ½ years on the following terms:

(i) initial premium: $36,000

(ii) monthly rent: $12,000

(iii) rent deposit: $12,000

(iv) management fee: $700 per month payable by Mr Ma

(v) rates: $1,500 per quarter payable by Mr Chu

It was agreed by the assessor that the rent owed by Mr Ho was irrecoverable after he had moved out from the property in 2019.

Required: a. Compute the property tax liabilities of Mr Chu for the year of assessment 2019/20. Ignore provisional property tax. b. Advise Mr Chu the treatment of the irrecoverable rent as provided under the IRO.

Answer 1

Cambutcetion of becopreesty Tex of 192. Popestry's The Reites is paid by Mr Chen and Mr. Lee as frees the Term of contrcent hence it is not forming part of Mr. chee Liability Property y Liability or Mr cha. For 2019 a 1200x4 a 480 2020 a 1200 XY 2 uso. leoperty in 019. - 1500x4 2 6070 2020 = 1500x ya 6oo. Total liabict of Mr Chu for A.Y Any 2019 a 2020 a 48w1 600o2 losu 4&cro & bero a lodeo,