Gross income: Recieved by or accrued to

Question 1

Rule regarding donations

Answer 1

When you have a donation and income accrues t the person who receives the donation - the income the person who receives the donation will be deemed to accrue to the person who made the donation

Question 2

Are both receipts and accrual taxed?

Answer 2

1. If an amount is taxed as accrual, it cannot be taxed as receipt again
2. SARS has no discretion to tax receipt rather than accrual

Question 3

What needs to take place for receipt to happen?

Answer 3

1. Received by TP on his own behalf for his own benefit

Geldenhuys:
* She had a usufruct over a flock of sheep and she decided to sell it
*ROR said that she had received the purchase price for purposes of IT.
*MRS G - she had the money in her hands but she didn’t “receive” it

Court: MRS G was just in control of the sheep and she didn’t receive the purchase price as income or own benefit - it was for the benefit and on behalf of her children

Question 4

MP Finance

Answer 4

Facts: TP operated a pyramid scheme
TP argument: upon receiving the money she immediately had to pay investors therefore she didn’t “receive” the money

Court:
1. She kept most of the money for herself and her family and continued to take the investors money knowing full well that she wont be able to pay them back
2. Therefore she accepted the money on her own behalf and for her own benefit therefore the money was received and formed part of her GI.

Question 5

“Accrued to” re Lategan

Answer 5

Facts: wine case.
ROR: wants to tax Mr L on the full 6000 pounds saying that “accrued to” means amounts to which you are entitled.

Court:
1. What accrued to Mr L was a debt payable in the future and the RIGHT to payment
2. But we cannot value the right at 2500 pounds
3. Right to claim in the future in what accrued to the TP
4. This is a valuable right that must be included in the TP GI. (only valued the right at face value)

Question 6

Peoples Stores

Answer 6

Facts: TP is a retailer that sold merchandise on credit. At the TP YOA the amount was still outstanding as the total of all installments were not yet due and payable

Court:
1. Tp is entitled to the RIGHT to future payment - something must be deducted from the future value because the payment is not immediately enforceable

Question 7

General rule regarding conditions?

Answer 7

1. Tp right to claim an amount must be unconditional for it to accrue
   if conditional = no accrual
2. Includes obligation on Tp to perform = no accrual

Question 8

Mooi v SIR

Answer 8

Facts: Mooi could buy shares at R1.25 on 2 conditions:
1. He would only exercise his option to subscribe to shares after the project was done
2. He had to be an employee
After the project was done he bought the shares at R1,25 but at that time it was valued at R6,40 so ROR says Mooi made a profit.
Mooi = if anything accrued to him - it accrued when he accepted the option

Court:
1. Right that TP acquired when he accepted his option was conditional
2. No accrual took place when option was accepted
3. Accrual only took place when all conditions were fulfilled and option became exercisable

Question 9

GUD Holdings

Answer 9

Facts: TP sold goods to consumers subject to an “early settlement discount”
At year end CSARS included full purchase price

Court:
1. TP encouraging client to pay on time
2. Client only liable for full P.P if they’re late
3. On the basis of Lategan and Peoples Stores; only question is what was the value of the TP right at the year end?
* Answer: reduced amount

Question 10

Rule re disposal of income?

Answer 10

Disposal does not effect accrual

Cession is possible:
1. Prior to accrual
2. After accrual