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2021 - Tax 1 > Final Exams > Flashcards

Final Exams Flashcards

1
Q

total amount in cash or otherwise?

A
  • every form of property w money value

- ascertainable monetary amount

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2
Q

onus of proving monetary amt?

A

SARS

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3
Q

if paid my non-monetary means?

A

include the market value of the asset

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4
Q

received by?

A
  • own benefit, own behalf

- intended to receive amount

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5
Q

deposit received?

A

included, can claim deduction later

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6
Q

usufruct?

A

right to use an asset

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7
Q

bare dominium?

A

right to own asset

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8
Q

accrued to?

A
  • unconditionally entitled to the amount

- amount incl at earlier of receipt or accrual

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9
Q

onus of proving non-taxability?

A

taxpayer

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10
Q

not of a capital nature?

A
  • produces revenue or benefits
  • income earning structure (tree vs fruit)
  • look at intention upon acquisition
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11
Q

speculative intention?

A

purpose of making profit = revenue

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12
Q

investment intention?

A

to earn returns on inv = capital

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13
Q

changes of intention examples?

A

no change:

  • realize at best advantage
  • happen to sell profit
  • mere intention to sell in future

change:

  • profit motivated
  • crossing the rubicon
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14
Q

realization company?

A

used to facilitate the realization of property which could not otherwise be dealt with satisfactorily. does not mean change in intention = capital

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15
Q

ipse dixit?

A

unproven statement

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16
Q

how to see if capital in nature?

A

subjective test. look at intention. if ipse dixit, use objective test.

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17
Q

damage and comp received?

A

loss of cap asset = capital

loss of profit = revenue

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18
Q

receipt from cancellation / variation of trade agreement?

A
  • normally revenue

- capital if so crucial, loss would cripple

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19
Q

other examples of cap vs rev amounts?

A

capital:

  • fortuitous gains
  • sporadic gambling success (losses not deductible)

revenue:
- professional gambling (losses deductible)

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20
Q

testing for residency? (natural persons)

A

ordinarily resident OR ppt

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21
Q

ordinarily resident?

A
  • where they return after their wanderings
  • habitually and normally resident
  • only 1 country at a time
    (OR)
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22
Q

physical presence test?

A
  • 91+ days in current year
  • 91+ days in each of the 5 preceding years
  • 915+ days in aggregate in the preceding 5yrs
    (AND)
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23
Q

other info for ppt?

A
  • when all met, person = res from beginning of year

- if absent for 330+ continuous days you will no longer be a resident from the day you left

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24
Q

residency for non-natural persons?

A
  • inc, est, formed in SA
    OR
  • effective place of mgmt in SA
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25
Q

source rule for imparting info?

A
  • amount is received from res OR info is used in SA
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26
Q

source rule for dividends?

A
  • from SA resident company
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27
Q

source rule for interest?

A
  • paid by resident OR funds are used/applied in SA
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28
Q

source rule for royalties?

A
  • paid by resident OR used in SA
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29
Q

source rule for services rendered?

A
  • all amts for behalf of an employer listed in the SA public sector = SA source, regardless of where service is performed
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30
Q

source rule for pensions

A

SA source if services are rendered in SA; can apportion

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31
Q

source rule for disposal of immovable property?

A
  • SA source if = property situated in SA = buyer is a resident and proceeds not taxed by any other country
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32
Q

if purchaser of immovable property is non-res?

A

then will be SA source if property is attributable to a private establishment in SA

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33
Q

list of special inclusions?

A
  • annuities
  • alimony and maintenance
  • dividends
  • restraint of trade pmts
  • all amts from services rendered
  • lump sum benefits
  • know-how pmts
  • fringe benefits
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34
Q

special inclusion for annuities?

A

allowed if:

  • periodic repayment
  • entitled to multiple pmts
  • no principle sum reduced by each pmt
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35
Q

special inclusion for restraint of trade pmts?

A

from brokers, personal service providers, by virtue of employment

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36
Q

special inclusion for services rendered?

A
  • regardless of who receives pmt

- causal relationship must exist between employment and receipt (case law)

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37
Q

special inclusion for lump sum benefits?

A

from variation of office, breach of emp contract, accumulated leave pay

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38
Q

special inclusion for dividends details?

A
  • full amount

- share repurchase would also = dividends

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39
Q

local interest exemption?

A
  • over 65 = R34500
  • under 65 = R23800
    (only for natural persons)
    (only res)
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40
Q

foreign dividend exemption?

A
  • fully exempt if more than 10% shareholding
  • partially exempt for nat person = 25/45
  • partially exempt for other persons = 8/28
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41
Q

local int exemption for non-residents?

A

if taxpayer has not, in the 12 months preceding accrual date:
- been in SA 183+ days
- carried on bus through SA private est
if you get exemption, subject to 15% WH tax

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42
Q

exemption for purchased annuity?

A 
Y = A/B x C
A = amt given to purchase
B = total expected receipts
C = amt incl in GI in this YOA
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43
Q

exemption for cancelled annuity?

A 
X = A-D
A = cash amount paid for annuity
D = all exemptions received to date
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44
Q

tax free investment?

A
  • earnings fully exempt

- contributions are limited = R36k per year, R500k aggregate; excess cont pays 40% tax but earnings always exempt

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45
Q

requirements for uniform allowance?

A
  • required to be worn by employer and distinguishable from ordinary clothes
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46
Q

exemption for persons employed outside RSA?

A

fully exempt ltd to R1 million and if they were outside SA:

  • 183+ days during any 12 month period AND
  • 60 continuous days absent AND
  • services rendered outside SA
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47
Q

bursary exemption for employee?

A
  • fully exempt if they agree to reimburse employer if they don’t complete their studies
  • must be at recognized educational institute
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48
Q

bursary exemption for relative of employee?

A
  • full amount incl into gross income bc they benefit from not paying. not exempt if remuneration proxy > 600k.
  • if < 600k, first 20k pre-matric, first 60k post matric
49
Q

bursary exemption for someone with a disability?

A
    • full amount incl into gross income bc they benefit from not paying. not exempt if remuneration proxy > 600k.
  • if < 600k, first 30k pre-matric, first 90k post matric
50
Q

fully exempt amounts?

A
  • alimony and maintenance
  • funeral benefits
  • local dividends if not annuity
51
Q

exemption for relocation allowances?

A

allowed for transport, acc for up to 183 days, costs incurred in selling previous residence and settling into new one

52
Q

exemption for insurance benefits accruing to employees?

A

when contributions made by employer, contributions fully exempt, payout is incl in GI

53
Q

fully exempt amounts for employment?

A
  • unemployment benefits
  • policy payouts of individual-owned insurance policy
  • war, disability pension
  • workman’s compensation
  • comp from road accident fund
  • amts from social security outside SA
54
Q

exempt entities?

A
  • government
  • institution/trust established by law
  • electoral commission
  • from charter of ship / aircraft
  • PBOs
  • rehab trust/trust
  • recreational clubs
  • pensions fund, mutual loan, indemnity fund
  • pensions payable to person/spouse who occupied office / VP
  • body corp / share block company
55
Q

two tests for general deductions?

A
  • s11a positive test = what is allowed

- s23g negative test = not allowed

56
Q

s11(a) preamble?

A
  • trade must be carried on
  • income must be derived from this trade
    (look if the preamble is met first, before looking at whether business gets a deduction)
57
Q

when are deductions allowed?

A

for expenditure and losses actually incurred during the YOA for the production of income that is not of a capital nature

58
Q

what is trade?

A
  • trade must be given widest possible interpretation

- excludes passive income unless specifically incl.

59
Q

what are exp/losses?

A

cash outflows or liabilities which may be settled in cash or otherwise

60
Q

actually incurred?

A
  • unconditional legal obligation; only once conditions are met
  • if expense is subject to an uncertain future event falling outside of the YOA = no expense
  • exp that is claimed as a deduction must be incurred in the YOA that the deduction is claimed
61
Q

the issue of shares for the acquisition of an asset?

A

not expense actually incurred

62
Q

in the production of income?

A
  • inevitable concomitant of trade
  • closely enough connected with income producing actions
  • apportionment allowed; be reasonable for circumstances
  • incurred for purpose of earning income but does not actually have to
63
Q

loan procured not for producing income?

A

not expense

64
Q

non-contractual, non-policy retirement pmt?

A
  • not expense, not in prod of income
  • retired work = no more income produced by them
  • only deductible if made to motivate employees & part of policy
65
Q

capital in nature?

A
  • gives rise to enduring benefit / adds to income earning structure = capital
66
Q

example of capital in nature?

A
  • exp from acquiring a capital asset

- fixed capital = income earning structure

67
Q

example of revenue in nature?

A
  • exp from working income-producing operations
  • floating capital
  • royalties to procure use of IP
68
Q

section 23(g)?

A
  • describes which deductions are not allowed and requires apportionment
  • no deductions are allowed for moneys claimed as a deduction to the extent that the money was not laid out for the purposes of trade
69
Q

case law principles for s23(g)?

A
  • link between trade & exp must not be too remote
  • expense does not have to produce profit in itself
  • borrowing money and re-lending at a higher rate = trade
  • entering into a loan to finance a dividend = not trade
70
Q

pre-trade expenditure definition?

A
  • money spent before business begins; generally capital in nature and spent setting up inc-earning structure
71
Q

can pre-trade exp be claimed as a deduction?

A
  • can be claimed in YOA that trading commences provided that they would have been deductible under s11, s11D or s24J but it was not allowed when incurred
  • allowed for exp/losses actually incurred prior to the commencement of and in prep for carrying out trade
72
Q

prohibited deductions list?

A
  • family/home maintenance for an individual
  • insured losses (direct link between loss and amt recoverable)
  • provisions
  • expenses incurred to produce exempt income; apportion
  • RoT payments
  • notional interest
  • fines and corrupt activities
  • expenses to earn foreign divs
73
Q

deduction for expenses relating to employment / holding of office?

A

prohibited unless permitted. only for remuneration earners.

74
Q

deduction for premiums paid on insurance policy?

A

if it covers person against illness, injury, death, disability, unemployment = prohibited

75
Q

deduction for cost of domestic / private expenses?

A

prohibited; except for property acquired for the purpose of trade, where it is specifically equipped and occupied exclusively and regularly for trade;
AND
taxpayer is not entitled to deduction if their trade = employment, unless:
> income is mainly derived from commission and employee duties are performed mainly outside offices provided by employer
OR
> duties are mainly performed on such part

76
Q

section 23B?

A

prohibits double deductions under more than one section of the ITA. no s11(a) deduction shall be allowed if a deduction is granted under any other section which may impose a limitation or be granted in a different YOA

77
Q

specific deduction for interest exp?

A

any int exp incurred from carrying on a trade

78
Q

specific deduction for legal expenses?

A
  • in respect of any claim, dispute, action, NOT settlement
  • not capital in nature
  • for claims against taxpayer which would not receive a s11a deduction
  • or for claims by taxpayer which would not be included into their income
79
Q

specific deduction for RoT payments?

A
  • allowed when payments are taxable in the hands of the recipient – amount is included in their gross income
  • deduction shall not exceed the lesser of amt/3 or amt/number of years
80
Q

specific deduction for bad debts?

A

s11(i)
allowed for debts which are due to the taxpayer, went bad during the YOA and in respect of amounts included into gross income this year

81
Q

requirements for doubtful debts deduction?

A

s11(j)

  • debts must qualify for s11(i) if they go bad
  • reverse prior year allowance first (+)
82
Q

specific deduction for doubtful debts for companies?

A
  • must be using IFRS
  • 40% for expected lifetime credit losses
  • 25% for other allowances
83
Q

specific deduction for doubtful debts for individuals?

A
  • 25% for debts in arrears for more than 60 days

- 40% for 120+ days

84
Q

specific deduction for employer contributions?

A

allowed for pension funds, providents, retirement annuity funds

85
Q

specific deduction for registering intellectual property?

A
  • fully deductible
  • not incl. copyrights
  • used in the production of income
86
Q

specific deduction for acquisition of intellectual property?

A
  • if more than 5000: 10% for patents, copyrights; 5% for designs
  • if less than or equal to 5000: 100%
  • not incl. trademarks
87
Q

specific deduction for repaying employee benefits?

A

allowed if included into the gross income for that YOA for the employee and the amount was in respect of services rendered

88
Q

specific deduction for refunding RoT payments?

A

fully deductible if included into the gross income of the recipient

89
Q

specific deduction for annuities paid to former employees?

A
  • if they retired because of old age, ill health, infirmity

- incl. payments to their spouses / dependants

90
Q

specific deduction for annuities paid to former partner?

A

if:

  • partner for at least 5 years
  • retired because of old age, ill health, infirmity
  • annuity is reasonable in relation to services rendered
  • not in lieu of partnership interest
91
Q

specific deduction for donations to PBOs?

A

s18A

  • allowed for donations to approved PBOs only
  • must obtain s18A receipt as evidence
  • if cash, 100% is deductible
  • limited to 10% of taxable income
92
Q

what if there is leftover donations that are excluded bc taxable income?

A

carried over to next year

93
Q

donations of trading stock?

A
  • deduct the amount taken into account in the gross income for that YOA
94
Q

donations of any other asset used for trade?

A
  • deduct the lower of cost less allowances and MV
95
Q

donations of any asset constructed for the purpose of donation?

A
  • deduct lower of cost and MV
96
Q

donations of immoveable property?

A
  • deduct B + (C x D)
    B = cost
    C = capital gain had it been disposed of at MV
    D = 60% for individuals, trusts; 20% for other
97
Q

s23H?

A
  • deferred deductions
  • can only be claimed when goods rec/services rendered
  • no deferral / limits if:
    > exp paid due to legislation
    > g/s will be supplied within 6 months of year end
  • aggregate of amounts subject to 23H does not exceed 100 000
98
Q

trading stock definition?

A

anything manufactured, constructed, produced by the taxpayer for the purpose of manufacture, sale, exchange by him/his behalf and its:

  • proceeds form / will form part of GI
  • any cons stores / spare parts acquired to be used in the course of trade
99
Q

case law principles for s22?

A

s22 is not applicable where the mining/separation of sand and disposal of sand take place in the same YOA. the sand deposits on the farm prior to mining = not trading stock

100
Q

sale of assets similar to trading stock?

A

para jA
- will be specifically incl. into GI under certain circumstances – must be manufactured, constructed, produced by the taxpayer and similar to any other asset they manufactured, constructed, produced

101
Q

spare parts?

A
  • capital but deductible under s11(d)
102
Q

cost of trading stock?

A

cost to acquire + further costs to get it to location and condition for sale

103
Q

closing stock?

A

s22(1) - add to taxable income at lower of cost and MV

104
Q

opening stock?

A

s22(2) - deductible from taxable income. use amount incl. in last year’s c/b. if disposed of at MV, value = MV

105
Q

stock acquired for no consideration?

A

SARS practice deduction at MV of the asset

106
Q

what is a recoupment?

A

amount is deducted from taxable income when purchased and when disposed of (not sale), it is added back to recoup the amount

107
Q

recoupment of stock applied for domestic/private use?

A
  • cost (ltd to carrying value if written down)

- MV if can’t find cost

108
Q

recoupment is MV when?

A
  • asset is disposed of other than in ordinary course of business
  • distributed in specie
  • applied for any other purpose
  • ceases to be held as stock
    (all OR)
109
Q

recoupment of donations to PBO?

A

recoup at same amount taken into account for that YOA for trading stock

110
Q

if stock is used for trade?

A

s22(8) recoupment
s11(a) proviso to s22(8)
at MV

111
Q

recoupment of assets similar to TS which are applied as capital assets?

A

no deduction

112
Q

recoupment of stock not disposed of in ordinary course of business?

A

MV or cost less amount received

113
Q

no s11(a) deduction for stock acquired…?

A
  • that is not disposed of by the end of the year
  • that is not included in c/b for year end
  • cost will be carried forward to the next YOA and will be claimed as a s11(a) deduction in the first YOA that it is disposed of / included in c/b / destroyed / for some other reason cannot be held or disposed of
114
Q

annuities?

A
  • specially included

- Y = A/B x C or X = A-D exemption

115
Q

alimony and maintenance?

A
  • specially included

- fully exempt

116
Q

restraint of trade pmts?

A
  • specially included
  • prohibited 11(a) deduction
  • specific deduction
117
Q

local/foreign dividends?

A
  • specially included

- exempt fully or partially

118
Q

relocation allowances?

A
  • specially included

- fully exempt

2021 - Tax 1 (15 decks)

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