Learning Unit 6 - Special deductions Flashcards
With reference to the section, are unrealized gains or losses on foreign exchange transactions included in determination of taxable income?
Section 24I requires that all gains and losses on foreign exchange transactions, irrespective of whether realized or not and irrespective of a capital nature or not, be included in the determination of taxable income.
How do you calculate foreign exchange gains or losses (make reference to the transaction date, translation date and realisation date)?
Exchange item acquired and realised during the current year of assessment
Exchange difference = Exchange item * exchange rate on transaction date - exchange rate*exchange item on realisation date
Exchange item acquired but not realised during the current year of assessment
Exchange difference = Exchange item * exchange rate on transaction date - exchange rate*exchange item on translation date
Exchange item acquired previous year and realised now
Exchange difference = Exchange item * exchange rate on translation date - exchange rate*exchange item on realisation date
With reference to the applicable legislation, indicate whether cost of sales is deductible from income.
Section 22 allows provides for the deduction of cost of sales from income.
The opening stock and purchases may be deducted from income and closing stock added to income.
How shall opening stock be deducted from gross income (cost or market value)?
Opening stock is deducted from gross income at the lower of cost price or market value
How much may be deducted in respect to a restraint of trade payment made?
The amount to be deducted may not exceed, for a year of assessment, the lesser of:
- so much of the amount incurred as is equal to the amount divided by the number of years or part thereof during which the restraint of trade applies; or
- one-third of the amount incurred.
With reference to the section, how is trading stock purchased during the year deducted?
Section 11 (a)
Expenditure incurred in acquiring trading stock is deductible in full in terms of section 11 (a).
With reference to the section what is included in the cost of trade stock?
Cost price of stock section 22(3) and (5)
The cost price of trading stock is:
- the cost incurred (during the current or any previous year of assessment) in acquiring the stock; plus
- Any further costs incurred in getting the stock into its existing condition and location less discounts and rebates (excluding exchange differences); or
- If an asset is acquired during the year as a capital asset then converted to trading stock, paragraph 12(2) of the Eight Schedule deems the asset to have been acquired at market value at the date of change of intention
Are payments made on behalf of an employee to a retirement fund or provident fund deductible? Make reference to the relevant section.
Section 11(l) provides for a deduction of a sum contributed by an employer during the year of assessment for the benefit of his employees to a pension, provident or retirement annuity fund. There is no limitation on the deduction and the amount is fully deductible in the current year of assessment.
With reference to the relevant section, are employee salaries and wages deductible?
The payment of salaries and wages of persons in the taxpayer’s business or for the purpose of his trade qualifies for deduction in terms of section 11(a).
Are contributions by an employer to a provident or retirement annuity fund deductible?
Are medical aid contributions deductible?
Section 11(l) provides for the deduction for contributions made to provident or retirement funds
Contributions to medical aid funds of the employees will not qualify for a deduction under section 11(l). These may be claimed under sec 11(a) if he can prove it was in the production of income.
Are annuities paid to persons by a taxpayer deductible?
Section 11 (m)
Annuities paid to the following persons are deductible:
- former employees
- former partners
- the dependents of deceased employees and partners who where dependents immediately prior to the death of the employee or partner
The deduction is subject to the following condition:
- The employee must have retired because of old age, ill health or infirmity
What deductions are claimable in respect to restraint of trade payments?
Section 11 (cA)
Restraint of trade expenses may be deducted if it constitute income in the hands of the recipient.
The amount deducted may not exceed for a year of assessment , the lesser of:
- so much of the amount incurred as is equal to the amount divided by the number of years or part thereof during which the restraint of trade applies
- One third of the amount incurred.
What deductions are available in respect to learnership agreements?
Section 12 H
The employer can claim an annual and completion allowance. The learnership agreement is deemed to be registered throughout the period of the agreement as long as the learnership agreement is registered within six months after the employer’s year of assessment
NQF level 1 - 6
(no disability)
Annual allowance: 40 000
Completion allowance: 40 000
(disability as defined)
Annual allowance: 60 000
Completion allowance: 60 000
NQF level 7 - 10
(no disability)
Annual allowance: 20 000
Completion allowance: 20 000
(disability as defined)
Annual allowance: 50 000
Completion allowance: 50 000
Under which cases are bad debts written off deductible?
Section 11(i)
Bad debts written off are deductible to the extent to which it has become bad during the year of assessment, provided that the amount was included in the taxpayer’s income.
In terms of sec 23(c), the Commissioner may dissallow the deduction
Under which cases are bad debts written off deductible?
Section 11(i)
Bad debts written off are deductible to the extent to which it has become bad during the year of assessment, provided that the amount was included in the taxpayer’s income.
In terms of sec 23(c), the Commissioner may disallow the deduction if the amount is recoverable from another person under a suretyship.
