Other

Question 1

S25 deceased estate

Answer 1

Income after death will be taxed in hands of legatee if asset bequeathed to them otherwise taxed in deceased estate
Not apply if deceased had right to the income in his lifetime
Income retains its identity
Rebates of deceased will be apportioned

Question 2

S24I and S25D Foreign exchange

Answer 2

24I. Any company, trust carrying on trade or natural person holding exchange item as trading stock. A natural person holding a fec.
Not apply to non residents.
For option contract initial premium is immediately deductible.
Include or deduct an exchange difference or premium in income.
Affected contract, debt not yet incurred. Will be incurred in normal course of trade.
Exchange differences relating to plant machinery and building are only taken into account when asset brought into use.
Unrealized Exchange losses are ignored from debts if between connected persons or group company. Only if no fec and not a current liability.
25D natural person may elect to use average rate for translation

Question 3

S24J interest

Answer 3

Deduct interest if incurred for purposes of trade and carry of trade.
Interest accrued must be included in holders income.
Interest incurred. Amortize and allocate using days of year.

Interest accrued to holder only for income instruments, exceed one year, acquired at discount or premium(rate not constant or payable within one year)

Disposal. Add interest accrued to pv to get adjusted amount to compare to proceeds. Included in income if dealer
If not dealer amount of interest included in income but never received will be deducted from income and the remainder will be a capital amount(original cost less proceeds)

Reconciliation. Between amounts included in tax and amounts received.

Dealers may elect that section does not apply, include in trading stock at mv

Question 4

S24 credit agreements and debtors allowance

Answer 4

Suspensive sale contracts
Installment sale where ownership transfer after receipt of portion to whole price by tax payer.
Total contract price must be included in tax payer gross income excluding finance charges.
Get allowance on amount not yet received after 11j doubtful debt allowance adjustment. Provided at lease 25% of price payable only fare 12 months.
Added back next year. Based on gross profit %. Does not apply to capital asset sales as not included in income.
Debtor excluding vat, doubtful and bad debts,and finance charges times gp%

Question 5

S24C allowance in respect of future expenditure contracts

Answer 5

Deduct a provision in one year which will be used in another.
Relief where income received in advance and expenditure only incurred in future.
Amount received which will be used to finance future expenditure for obligations of the contract which will be deductible.
Thus must incur expenditure after year amount received.
Allowance cannot exceed amount received.

Gp% method. (Allow income received to date x total cost / total revenue) less actual cost to date
Include in income amounts received and actual costs.

Allowances on assets are deemed future expenditure. No allowance is allowed if assets bought before year end.

Question 6

S19 reduction of debt

Answer 6

Trading stock
If still on hand: Reduce cost of stock by reduction amount
If partly sold: reduce remainder of cost and rest included in income.

Tax deductible expenses
Recoupment of reduction amount, automatically reducing assessed losses.

Allowance asset
First reduce base cost, remaining is recoupment of allowances