TAX2601 Oct/Nov 2013 exam paper — questions

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  1. Question 1.1 · Tax administration · 5 marks

    Beauty (Pty) Ltd, a resort and spa company, received its income tax assessment (ITA34) for the year of assessment ended 31 March 2013. Included in the assessment was an advertising expense of R18 000 that had been claimed as a deduction, paid in twelve monthly instalments of R1 500 each to an advertising agency to promote the company's products and services. The Commissioner disallowed the deduction on the basis that the amount was capital in nature since it would create an enduring benefit. As the newly appointed accountant of Beauty (Pty) Ltd, you are of the view that the expense is in fact revenue in nature, and you wish to lodge an objection with SARS regarding the disallowed R18 000 advertising expense. Set out the administrative steps that must be followed to lodge an objection and, if necessary, an appeal to SARS regarding the disallowed R18 000 advertising expense of Beauty (Pty) Ltd.Show the full question

  2. Question 1.2 · Tax administration · 5 marks

    Beauty (Pty) Ltd, a resort and spa company, received its income tax assessment (ITA34) for the year of assessment ended 31 March 2013. Included in the assessment was an advertising expense of R18 000 that had been claimed as a deduction, paid in twelve monthly instalments of R1 500 each to an advertising agency to promote the company's products and services. The Commissioner disallowed the deduction on the basis that the amount was capital in nature since it would create an enduring benefit. As the newly appointed accountant of Beauty (Pty) Ltd, you are of the view that the expense is in fact revenue in nature, and you wish to lodge an objection with SARS regarding the disallowed R18 000 advertising expense. SARS is required to keep a register of all disputes that it resolves through the Alternative Dispute Resolution (ADR) process. List the five elements that must be recorded by SARS once a dispute (objection) has been settled by way of this ADR process.Show the full question

  3. Question 1.3 · Tax administration · 5 marks

    Beauty (Pty) Ltd, a resort and spa company, received its income tax assessment (ITA34) for the year of assessment ended 31 March 2013. Included in the assessment was an advertising expense of R18 000 that had been claimed as a deduction, paid in twelve monthly instalments of R1 500 each to an advertising agency to promote the company's products and services. The Commissioner disallowed the deduction on the basis that the amount was capital in nature since it would create an enduring benefit. As the newly appointed accountant of Beauty (Pty) Ltd, you are of the view that the expense is in fact revenue in nature, and you wish to lodge an objection with SARS regarding the disallowed R18 000 advertising expense. List five taxes or duties that are collected by SARS.Show the full question

  4. Question 2.1 · Small business corporations and micro businesses · 5 marks

    Peter Prune and Lydia Lemon are the sole shareholders of Frutula (Pty) Ltd, a company that began trading on 1 June 2012 after being incorporated in April 2012. Neither Peter nor Lydia holds shares in any other company. Frutula's only source of income is the cash sale of fruit at informal markets (only cash is accepted from customers), the fruit itself being bought daily from the fresh produce market in Johannesburg. Acting as the tax practitioner at XBM Accountants and Auditors, you receive the following figures and calculations by e-mail from Frutula's accountant for the period ending 28 February 2013: cash/revenue receipts of R650 000; a cash capital gain of R55 000 from the sale of redundant equipment used mainly for business purposes; interest received of R17 500 (covering 1 April 2012 to 28 February 2013); taxable turnover, excluding the capital gain and the interest, of R610 000; qualifying turnover of R680 000; taxable income, excluding the interest received and the capital gain, of R385 000; and a first provisional tax payment of R30 250 made on 31 August 2012. List the requirements that a company must meet in order to qualify as a small business corporation, as defined for the 2013 year of assessment.Show the full question

  5. Question 2.2 · Small business corporations and micro businesses · 4 marks

    Peter Prune and Lydia Lemon are the sole shareholders of Frutula (Pty) Ltd, a company that began trading on 1 June 2012 after being incorporated in April 2012. Neither Peter nor Lydia holds shares in any other company. Frutula's only source of income is the cash sale of fruit at informal markets (only cash is accepted from customers), the fruit itself being bought daily from the fresh produce market in Johannesburg. Acting as the tax practitioner at XBM Accountants and Auditors, you receive the following figures and calculations by e-mail from Frutula's accountant for the period ending 28 February 2013: cash/revenue receipts of R650 000; a cash capital gain of R55 000 from the sale of redundant equipment used mainly for business purposes; interest received of R17 500 (covering 1 April 2012 to 28 February 2013); taxable turnover, excluding the capital gain and the interest, of R610 000; qualifying turnover of R680 000; taxable income, excluding the interest received and the capital gain, of R385 000; and a first provisional tax payment of R30 250 made on 31 August 2012. Assuming Frutula (Pty) Ltd qualifies as a small business corporation, calculate its final tax liability for the year of assessment ended 28 February 2013.Show the full question

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