Special inclusions Flashcards

included in gross income mostly are capital in nature or not residency of SA

1
Q

Leasehold improvement should be included in the gross income of lessee if the lessor had a contractual obligation to perform the improvements.

A

False

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2
Q

Foreign dividends do not form part of taxpayer’s gross income.

A

False

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3
Q

The sale of a copyright in an operating manual is a special inclusion in terms of paragraph (gA) therefore, included as pert of gross income.

A

False

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4
Q

Any restraint of trade amount received by a labour broker does form part of gross income.

A

True

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5
Q

A lease premium is not defined in the Income Tax Act

A

True

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6
Q

Interest is capital in nature and does not form par of gross income

A

False

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7
Q

An annuity is defined in the Income Tax Act.

A

False

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8
Q

What are the different types of annuities, and how do they differ from one another?

A

The different types of annuities include capital annuities, living annuities, and annuities amount (section 10A). Capital annuities are typically paid out in a lump sum or periodic payments over a predetermined period, while living annuities provide regular payments during the annuitant’s lifetime. Annuities amount (section 10A) refers to annuities received as income, subject to specific tax regulations.

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9
Q

True or False: An annuity always provides for a fixed annual payment without any possibility of change.

A

False. While annuities typically offer fixed payments, they can sometimes include provisions for payment increases or adjustments.

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10
Q

True or False: An annuity received directly from an individual’s employer, via a life insurance policy, falls under paragraph d(ii) of the gross income definition, making it subject to specific tax considerations.

A

True. Annuities received from an individual’s employer, indirectly through a life insurance policy, are often excluded from certain tax considerations as per paragraph d(ii) of the gross income definition

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11
Q

True or False: Annuities and pensions are considered synonymous and are taxed identically in all jurisdictions.

A

False. While annuities and pensions both provide regular income, they may be taxed differently depending on the jurisdiction and specific tax laws governing each type of payment.

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12
Q

True or False: An annuity can only originate from an insurance company and cannot arise from other sources such as gifts or the sale of a business.

A

False. Annuities can originate from various sources, including insurance companies, gifts, legacies, or as consideration for the sale of a business or asset

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13
Q

True or False: An annuity, by definition, must provide for payments over the annuitant’s lifetime and cannot be structured for a fixed term.

A

False. While some annuities provide payments over the annuitant’s lifetime (living annuities), others may be structured for a fixed term, such as a certain number of years (term certain annuities).

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14
Q

True or False: An annuity received as a series of voluntary payments, even if repetitive, would still be classified as an annuity for tax and legal purposes.

A

False. Annuities are typically characterized by fixed, periodic payments with an obligation to pay, distinguishing them from voluntary payments, even if repetitive.

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15
Q

True or False: An annuity arising from the sale of a business represents a form of structured payment agreement between the buyer and seller.

A

True. Annuities arising from the sale of a business or asset often involve the buyer making periodic payments to the seller in exchange for the transfer of ownership, providing the seller with regular income.

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16
Q

True or False: An annuity can never include provisions for payment adjustments or increases over time.

A

False. Some annuities may include provisions for payment adjustments or increases, allowing for changes in payment amounts over time.

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17
Q

True or False: All annuities are subject to the same tax treatment regardless of their source or purpose

A

False. The tax treatment of annuities may vary depending on factors such as the source of the annuity, the purpose for which it was received, and applicable tax laws in the jurisdiction

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18
Q

True or False: An annuity received as a gift or legacy is always exempt from taxation.

A

False. Annuities received as gifts or legacies may be subject to gift or inheritance tax laws depending on the jurisdiction and the value of the annuity.

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19
Q

What types of payments are included in the gross income definition for alimony or maintenance?

A

Alimony, allowances, or maintenance payments made by a spouse or former spouse are included in the gross income definition for alimony or maintenance.

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20
Q

In what circumstances does alimony qualify as gross income?

A

Alimony qualifies as gross income when it is payable under a written agreement of separation or order of divorce.

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21
Q

Does the paying spouse receive a tax deduction for alimony payments?

A

The paying spouse does not receive any tax deduction for the amount paid as alimony.

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22
Q

If maintenance is paid by a pension fund to a member’s ex-spouse, how is it treated for tax purposes?

A

If maintenance is paid by a pension fund to a member’s ex-spouse, the member is deemed to have received the amount as income.

23
Q

How are payments for the maintenance of children treated in the context of gross income?

A

Payments for the maintenance of children are included in the gross income definition for alimony or maintenance.

24
Q

What types of income are deemed to be gross income under paragraph (c)?(service rendered)

A

All amounts received in respect of services rendered or employment, whether of capital or revenue in nature, are deemed to be gross income under paragraph (c).

25
Q

Provide examples of amounts that fall into paragraph (c of services rendered.

A

 Voluntary bonuses e.g. performance bonuses
 Tips received by waiters
 Reward for providing the police with information.
 Voluntary awards =part of gross income even though not stipulated in service rendered.

26
Q

Are voluntary bonuses, such as performance bonuses, considered part of gross income? Why or why not?

A

Yes, voluntary bonuses such as performance bonuses are considered part of gross income because they are received in respect of services rendered.

27
Q

How are tips received by waiters treated for tax purposes?

A

Tips received by waiters are treated as part of gross income because they are received in respect of services rendered.

28
Q

Is a reward for providing information to the police considered part of gross income? Why?

A

Yes, a reward for providing information to the police is considered part of gross income because it is received in respect of services rendered.

29
Q

Is there a requirement for an employer/employee relationship to exist for an amount to be included in gross income under paragraph (c)?

A

No, there is no requirement for an employer/employee relationship to exist for an amount to be included in gross income under paragraph (c).

30
Q

How are fortuitous gains distinguished from income for tax purposes?

A

Fortuitous gains, which happen by chance, are not included in gross income. An example would be a beggar receiving money.

31
Q

What constitutes a restraint of trade payment?

A

A restraint of trade payment is a payment made for undertaking not to render service.

32
Q

What are lump sum benefits according to paragraph (d)?

A

Lump sum benefits, according to paragraph (d), are amounts paid to an employee by an employer or associated institution due to a change or loss of employment.

33
Q

Provide examples of lump sum payments covered under paragraph (d).

A

Examples of lump sum payments include payments for
*breach of service contracts, *consideration for directors who lose their directorship, *compensation for variations in leave entitlement, *accumulated leave pay upon resignation, and
*payments to the dependents of a deceased employee

34
Q

What does the commutation of amount due, as mentioned in paragraph (f), refer to?

A

The commutation of amount due refers to the substitution of benefits due in terms of employment into cash.

35
Q

How is cash received through the commutation of amount due treated for tax purposes?

A

Cash received through the commutation of amount due is included in gross income for tax purposes.

36
Q

Give examples of situations covered under the commutation of amount due provision.

A

Examples of situations covered under the commutation of amount due provision include substituting leave days for cash and receiving lump sums upon termination of services.

37
Q

What is a lease premium according to paragraph (g)?

A

A lease premium, according to paragraph (g), is a payment made over and above or instead of rental for the use of an asset.

38
Q

How is a lessor ?

A

a lessor is the entity or person who owns the asset and grants the right to use the asset to another party in exchange for payment.

39
Q

Who is a lessee?

A

is the party who receives the right to use the asset in exchange for payment.

40
Q

What does a lease premium represent in relation to rental payments?

A

A lease premium represents an additional payment made by the lessee to the lessor, either in addition to or instead of regular rental payments, for the use of the asset

41
Q

Is the full amount of the lease premium included in the lessor’s income?

A

Yes, the full amount of the lease premium is included in the lessor’s income.

42
Q

What is meant by compensation for imparting knowledge according to paragraph (gA)?

A

Compensation for imparting knowledge, as defined in paragraph (gA), refers to payments received for the use of knowledge or information, or for rendering assistance or services related to such knowledge or information

43
Q

Provide examples of transactions that fall under compensation for imparting knowledge

A

Examples of transactions falling under compensation for imparting knowledge include the sale of operating manuals or information and technical advisory fees.

44
Q

How are know-how payments defined?

A

Know-how payments encompass amounts received for the use of scientific, technical, industrial, or commercial knowledge or information, as well as payments for providing assistance or services in connection with such knowledge or information.

45
Q

Is the supply of information, such as operating manuals, included in compensation for imparting knowledge?

A

Yes, the supply of information, such as operating manuals, is included in compensation for imparting knowledge.

46
Q

Is the sale of a copyright in an operating manual considered part of compensation for imparting knowledge?

A

No, the sale of a copyright in an operating manual is not included in compensation for imparting knowledge

47
Q

Can you explain the difference between amounts received for the use of knowledge or information and amounts received for rendering assistance or service in connection with knowledge or information?

A

Amounts received for the use of knowledge or information involve the direct utilization of the knowledge or information, while amounts received for rendering assistance or service in connection with knowledge or information pertain to providing support or aid related to the application or implementation of the knowledge or information.

48
Q

What are leasehold improvements according to paragraph (h)?

A

Leasehold improvements refer to enhancements made by a lessee to a leased property, whether land or building.

49
Q

Under what circumstances does a lessor have to include leasehold improvements in gross income?

A

A lessor must include leasehold improvements in gross income if the lessee is contractually obliged to perform the improvements.

50
Q

If a lessee is not contractually required to make improvements, does the lessor have to include them in gross income?

A

If a lessee is not contractually required to make improvements, the lessor does not have to include them in gross income

51
Q

What happens if a lessee spends more money on improvements than stipulated in the contract?

A

If a lessee spends more money on improvements than stipulated in the contract, the excess amount does not form part of the lessor’s gross income.

52
Q

What types of assets are included in gross income from the proceeds of their disposal?

A

Assets that are included in gross income from the proceeds of their disposal are those that are similar to trading stock.

53
Q

Can you provide examples of assets that fall under the category of those included in gross income from disposal proceeds?

A

Examples of assets included in gross income from disposal proceeds are those that are
*manufactured,
*produced,
* constructed, or
* assembled.

54
Q

How are assets that are merely purchased for own use or for resale treated in terms of gross income from disposal proceeds?

A

Assets that are merely purchased for own use or for resale are not included in gross income from disposal proceeds.