Week 7 - s23g Deductions Flashcards
s23g rules for deductions?
no deductions are allowed from income (derived from trade) for expenses which were not laid out for purposes of trade
apportionment in s23(g)?
- for trade purpose = deductible
- non-trade purpose = non-deductible
case law principles on trade expenditure?
- link between a comp’s trade and the exp incurred must not be too remote to = deductible
- the expense did not have to produce profit in itself
borrowing money and re-lending at a higher rate of interest?
= trade = deductible
pre-trade expenditure?
spent before business is begun – usually capital in nature as it is spent setting up the income earning structure
s11A?
- taxpayer can claim a deduction in year that trade commences for expenses/losses actually incurred prior to the commencement of / in prep for carrying on that trade
when is s11A allowed?
only allowed if the amount would have been deductible in terms of s11, D or s24J but were not allowed when incurred
insured losses?
must be a direct link between loss and amt recoverable. only leftover portion not covered by insurance deductible and don’t include payout in gross income.
prohibited deductions section?
s23
expenses incurred for the purpose of earning exempt income?
apportion = if earns both exempt and non, apportion based on the total
expenditure relating to employment / holding of office?
no deduction allowed for individuals who earn remuneration (not agents earning commission), unless specifically permitted
the cost of domestic / private expenses?
(groceries, school fees) = no deduction
- except in respect of property occupied for the purpose of trade – where it is specifically equipped and occupied exclusively & regularly for trade
- the taxpayer will not be entitled to a deduction if their trade constitutes employment, unless income = mainly comm and duties are performed mostly outside employer-provided office OR employees duties performed mainly in such part
s23B?
- contains a prohibition against double deductions under more than 1 inc tax act section
- no deduction allowed under s11(a) if a deduction is granted under any other section that may impose limitations and may be granted in a different YOA
general principle of specific deductions?
- requirements must be met = deduction
- consider if there is a limitation to the deductible amount
specific interest deduction?
any int exp actually incurred by the taxpayer during the YOA from carrying on trade if in production of income
specific legal exp deduction?
- actually incurred in respect of any claim, dispute
- must not be capital
- incurred in respect of claim amount which would not have been deductible under s11a (we get sued)
- incurred in respect of claim made by taxpayer which does not constitute income (we sue)
specific bad debts deduction?
must be:
- due to taxpayer
- become bad during year
- in resp of amts included in taxpayer’s income this yr (accured amount)
req for restraint of trade pmt deduction?
amount must be:
- actually incurred in course of trade
- imposed on natural person
- will be included in GI of person who receives it
restraint of trade payments amount specs?
cannot exceed the lesser of:
- pmt amount / no of years
- amount incurred / 3
specific doubtful debts deductions?
- debts must qualify for s11(i) (BD) if they go bad
- every year the allowance must be reversed before we can claim the current year allowance
requirements for an IFRS comp (doubtful debts)?
- 40% of the sum of the allowance measured in terms of lifetime exp credit losses and any debs written off for FR
- 25% for other allowances
how to calc for an non-IFRS (doubtful debts)?
- 25% for debts 60+ days in arrears
- 40% for debts 120+ days in arrears
method for doubtful debts deduction?
add back previous year deduction
less 40% and 25%
= negative amount is the deduction
employer contributions to funds deductions?
full deduction for contributions to:
- pension
- provident
- retirement annuity fund
allowed as per s11F
annuities paid to former partners on retirement for employees?
for those who:
- retired bc old age, infirmity, ill health
- were partners for >5 years
- annuity reasonable ito service as a partner and profit earned
- not in lieu of partnership
repayment of employee benefits deductions?
if we (the employee) receive a payment for services rendered that was included in our taxable income, and it is refunded, a deduction is allowed for the amt/portion
registration of intellectual property?
- used in production of income (designs, trademarks)
- NOT copyrights
- full cost deductible
acquisition of intellectual property?
- asset brought into tho use for the first time, used in production of income
- NOT trademarks
- full cost deductible
specs for acq of IP?
- if >5000: 10% for design/similar, 5% for copyright/patent/similar
- if <5000: 100%
s11x?
- brings other deductions into s11
- if allowed as a deduction by any other section within this part of the act then = deduction
donations to PBOs?
allows for deductions of donations to:
- approved PBOs
- s18A deduction receipt must be provided
- limited to 10% of taxable income before this deduction
trading stock donation?
amount that is taken into account for 22(8) recoupment (value of the TS during that YOA)
asset (used by taxpayer for trade, not TS) donation?
lower of:
- cost of property less allowance allowed to be deducted
- fair MV
asset purchased/constructed for purpose of donation?
lower of cost and fair MV
immovable property donation?
(where lower of MV and muni value > cost)
- B + (C x D)
B = cost
C = capital gain that would have been determined had it been disposed of for an amt lower of MV and mv
D = 60% for natural person/trust, 20% elsewhere
any other asset donation?
lower of MV and cost
no donations deduction if?
- property is subject to any fiduciary right, usufruct
- intangible asset
- financial instrument (unless share in listed company / elligible financial institution)
