Rules of Gross Income, exemptions, Inclusions, deductions Flashcards
What is the definition of Gross Income?
Section 1(1) of the ITA
- The term “gross income” is broadly defined as the total amount, in
cash or otherwise, received by or accrued to a resident during a year of assessment
which is not of a capital nature
What does “Any amount received by or accrued to” mean?
- “Amount” is not defined in the Act. However, it has been the subject matter of various court cases and has been held to include money and receipts or accruals in a form other than money which have a monetary value.
- “received by” must mean ‘received by the taxpayer on his own behalf for his own benefit’ according to the Geldenhuys v CIR Steyn J Case
- “Accrued to” must mean “to which he has become entitled” according to the WH Lategan v CIR Case
What are the rules for money for services Rendered?
Section 1(1)(c) of the ITA ( this is a special inclusion)
- Any amounts received for services rendered must be included in Gross Income
How can I decide if Legal expenses are deductible?
Section 11(c) of the ITA
- allows for the deduction of certain legal expenses actually incurred during the year of assessment for a dispute arising in the course of the ordinary operations undertaken in the carrying on of a trade and not of a capital nature.
- Section 23B means you cant deduct it under Section 11(a) now
What are the Tax Implications of an expense that has been prepaid?
Section 23H
- If the prepaid portion of that expense is less than 100,000(if exactly 100,000, then its over) OR the expense will be incurred within the next 6 months of the next year of assessment, then you will be able to deduct it within the current year of assessment
What does it mean if someone Pays a Retainer Fee? and What are the tax Implications?
A retainer Fee is essentially a prepaid expense, you pay the fee in order to secure the services of the lawyer for the next period.
What are the tax implications of a Restraint of Trade Payment/Agreement?
Section idk of the ITA
- When a payment like that is made, you need to spread the deduction over a minimum of 3 years, or if the length of the restraint of Trade agreement is more than 3 years, then it’ll be over the length of the agreement.
When are repair expenses deductible?
Section 11(d) of the ITA
look at your 3rd Notes
When can you make a deduction for a keyman insurance policy?
Section 11(w) of the ITA
Look at your Third year notes
When can Pre-Trade expenses and losses be deducted?
Section 11(A) of the ITA
Look at your third year notes for this
Are deposits included within your Gross income?
- According to the Income Tax Act deposits are not included in the definition of consideration and the gross income definition relates to the total amount of CONSIDERATION received or accrued.
