3. Gross Income

Question 1

When is an amount included in gross income?

Answer 1

If it either;

1. Complies with the definitions per Act
2. Special inclusion

Question 2

What is the definition of gross income?

Answer 2

In relation to in year or period of assessment:
a) in the case of a resident, total amount, in cash or otherwise, received by or accrued to or in favor of such a resident or
b) in the case of any other than a resident, total amount, cash or otherwise, received by or accrued to or in favor of such a person from a source within the republic
During such year or period of assessment, excluding receipts or accruals of a capital nature.

Question 3

What are e two sections of the definition?

Answer 3

1. Residents and

2. Non residents

Question 4

What are the components of the definition of gross income?

Answer 4

1. Resident
2. Total amount
3. Received by or accrued to
4. Year or period of assessment
5. NOT of a capital nature

Question 5

Which components of the gross income definition must be met In order for an amount to be included?

Answer 5

ALL of them

Question 6

What are the tests applied for a natural person to be considered a resident?

Answer 6

1. Ordinarily resident test

2. Physical presence test

Question 7

Is it required that both the ordinarily resident test AND physical presence tests be met?

Answer 7

No.

If the ordinarily resident test is complied with then the physical presence is not necessary

Question 8

What is the first step in determining a persons residence?

Answer 8

Determine of they are ordinarily a resident

Question 9

What is done if someone is not an ordinarily resident?

Answer 9

The physical presence test is applied

Question 10

What are the ordinarily resident principles?

Answer 10

1. A place where there is a regular course of life to live with a degree of permanence
2. A place to return after wonderings and call home
3. They can be ordinarily resident if absent for a year, then consider the life outside country
4. Must be settled and certain and not temporary
5. Where belongings are stored and returns after absences
6. Ordinarily resident is a narrower term than resident. It means normally resides.

Question 11

Since when is a taxpayer an ordinarily resident?

Answer 11

From the time they are an ordinarily resident.

This means it could be less than a year.

Question 12

What is the taxpayer before ordinarily resident?

Answer 12

A non resident

Question 13

What are other names for the physical presence test?

Answer 13

1. Day test

2. Time rule

Question 14

What is the physical presence test based on?

Answer 14

The number of full days they were physically present in the country

Question 15

Is the purpose or nature of the visit to country relevant when considering physical presence?

Answer 15

No

Irrelevant

Question 16

What are the rules for the physical presence test?

Answer 16

They must be present for:

1. 91 days in total during the year of assessment and
2. 91 days in total for each of the 5 preceding years to year of assessment
3. 915 days in total for the whole period of 5 preceding years

Question 17

What is regarded as a full day concerning the physical presence test?

Answer 17

Part of a day

Excluding transit

Question 18

When is a person not anymore considered a resident after being a physical resident?

Answer 18

If they have been absent for a continuous 330 days, they are deemed not resident since the beginning of those 330 days.

Question 19

What date does the physical resident become a resident?

Answer 19

At the beginning of the period of assessment where ALL requirement have been met. Therefore taxed on all world income since beginning of year

Question 20

Who does the burden of proof rely on for a physical resident?

Answer 20

With the taxpayer themselves

They will have to prove they aren’t a physical resident

Question 21

Does being a resident mean you are a passport holder?

Answer 21

No

Question 22

Must there be an actual amount received or accrued to before gross income exists?

Answer 22

Yes

Question 23

What does the “or otherwise” part of cash mean?

Answer 23

Value of assets received in lieu of cash will be included

Question 24

What will be the value of assets received?

Answer 24

Market value on date of received

Question 25

What are one of the problems of including amounts other than cash?

Answer 25

Whether as to include it as its objective or subjective values

Question 26

What does subjective value mean?

Answer 26

Taken with influence from persons feelings, taste or opinion

Question 27

What are notional amounts?

Answer 27

Amounts that could have been received. E.g. Interest if they invested it

Question 28

Are notional amounts included in gross income?

Answer 28

No

Question 29

What does accrued to mean?

Answer 29

The taxpayer has become entitled to the amount

Question 30

When is the amount included in gross income?

Answer 30

Earlier of receipt or earlier of accrual

Question 31

Only when does accrual occur?

Answer 31

When the person is UNCONDITIONALLY entitled to the amount

Question 32

What is a usufructory?

Answer 32

Where someone enjoys e fruits and benefits of an asset where a bare dominium is the actual owner of the asset itself.

Question 33

Does a mere receipt of an amount mean that that person must include it in their gross income?

Answer 33

No because it may be received on behalf of someone else. Then they would include it

Question 34

If a person illegally overcharges a customer, is it still a receipt?

Answer 34

Yes

Question 35

Where a person is knowingly seeking stolen goods, is it still receipt?

Answer 35

Yes because it’s for their own benefit

Question 36

Does SARS recognize difference between income from illegal and legal activities?

Answer 36

No

Question 37

What amount is included in gross income when there is a credit sale and payment over a period is implemented?

Answer 37

The full amount.

No present value is seen

Question 38

What if a discounted amount is included and the actual payment differs?

Answer 38

The difference must be included

Question 39

What is the date of accrual concerning rent etc.?

Answer 39

The date it is due

Question 40

What is edition 9A?

Answer 40

Where a person who can’t bring an amount into the country and it’s included in gross income, they can provide an allowance for it.

Question 41

Can someone divest income?

Answer 41

Yes. The person it is vested to will include it in their gross income

Question 42

What takes place first with cash sales?

Answer 42

Accrual and receipt at same time

Question 43

What takes place first with credit sales?

Answer 43

Accrual

Question 44

What take place first with advance payment

Answer 44

Receipt

Question 45

When does a natural persons period of assessment end?

Answer 45

February 28/29

Question 46

What are the two tests implemented by courts to decide whether something is of a capital nature or revenue nature?

Answer 46

1. Subjective tests

2. Objective tests

Question 47

What are the factors to look at for subjective tests?

Answer 47

1. Intention
2. Change of intention
3. Mixed intentions
4. Establishing true intention

Question 48

What is the story to remember principles of ordinarily resident?

Answer 48

1. Man is in house doing about daily chores. Degree of permanence
2. Leaves to shop, and returns. Return from wonderings
3. Leaves again on a years cruise, comes back after a year. If absent a year, the life outside is considered.
4. gets home again and settles ini comfy armchair. Settled and not temporary
5. Walks around looking at his belongings. Belongings are kept and returned to.
6. Ordinarily resident is narrower term than resident.