Tax Module 3.1 - General Deductions

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What are the two tests for general deductions?
S11a (which amts are deductible) + S23g (which amts aren't deductible)
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According to s11a when are deductions allowed?
Expenditure/losses, actually incurred during YOA, in the production of income and not of a capital nature
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What is the preamble?
Trade to be carried on + income must be derived from such trade
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Where are the amounts deducted from?
Income NOT GI
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What is trade - Burgess Vs CIR?
Trade must be given the widest possible interpretation
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Is dividend and interest income included in trade?
Not unless you're a bank or trader (active vs passive)
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What is practise note 31 for?
When you earn interest income but also incur interest expense - eg. borrow at 7% and invest at 8% - deduction limited to interest income produced
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Expenditure and loss refers to?
Cash outflows and liabilities
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Actually incurred - Edgard Stores Vs CIR?
Only expenditure for which tp has UNCONDITIONAL LEGAL OB to pay may be deducted
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Actually incurred - Nasionale Pers BBK?
Raising of a provision doesn't constitute expenditure actually incurred - if payment is conditional expense only incurred once condition is met
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Actually incurred - Golden Dumps?
Liability incurred once outcome of dispute been determined
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Actually incurred - LABAT?
Company issuing shares to pay for asset does NOT constitute expenditure actually incurred
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During the YOA - Sub Nigel Ltd?
No expenditure incurred in previous year can be deducted in current year
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In the production of income - PE Electric Tramways?
Question is whether the action which produced expenditure is closely enough related with actions that produce income
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In the production of income - Joffe?
Expenditure is deductible if its an 'INEVITABLE CONCOMITANT' of the income earning operations (not if there's negligence though)
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In the production of income - Provider?
Lump sum paid in terms of a general policy (ie bonuses/pmt on retirement) is in production of income because it encourages workers to start or stay working for you
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In the production of income - MTN?
Not always possible to apply strict arithmetical apportionment formula - it must simply be fair and reasonable
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In the production of income - BP SA?
The objective of the loan decides whether the interest will be deductible (eg. funding CAPEX = prod. of income)
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Not of a capital nature - New State Area?
True purpose of expenditure must be investigated - floating capital and income earning ops = REVENUE whereas fixed capital and income earning structure = CAPITAL
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Not of a capital nature - Rand Mines?
Does the expenditure give rise to an enduring benefit and add to income earning structure? (In this case it was aq. of management contract)
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Not of a capital nature - BP SA?
If payment is to procure use not ownership expense doesn't create a capital asset
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According to S11A - pre-trade expenditure - money spent before business has begun is usually...?
Capital in nature - setting up income operating structure not using it
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Which expenses aren't classified as capital according to S11A?
Salaries, rental, cleaning expenses - can deduct in year that trade commences
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What section details the prohibited deductions?
S23
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What are the rules for s23a + b - private and domestic expenses?
Can only deduct if working at home and property occupied exclusively for trade purposes AND you're not an emplpyee
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When can an employee get private and domestic expense deduction?
Income derived mainly from commission + duties performed mainly outside office provided by employer OR duties mainly performed in home office
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What does S23d prohibit?
Any tax imposed under ITA OR any interest or penalty imposed by an Act administered by SARS (eg. late tax payment penalty(
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What does S23e prohibit?
Provisions - linked to s11a - only deduct where exp actually incurred
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What does s23f prohibit?
Expenses incurred to produce exempt income - apportion if part is for non exempt income by using Income/GI x Expense
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What does s23h prohibit?
Notional interest ie. opportunity cost of interest not earned
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What does s23l prohibit?
Restraint of trade payments
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What does s23m prohibit?
Expenditure relating to employment - except for pension fund, legal exp, wear + tear, bad + doubtful debts
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What does s23o prohibit?
Fines and corrupt activities eg. speeding tickets and bribes
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What does s23q prohibit?
Expenditure incurred to earn foreign dividends
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What does s23r prohibit?
Premiums on life and unemployment policies
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Other cards in this set

Card 2

Front

According to s11a when are deductions allowed?

Back

Expenditure/losses, actually incurred during YOA, in the production of income and not of a capital nature

Card 3

Front

What is the preamble?

Back

Preview of the front of card 3

Card 4

Front

Where are the amounts deducted from?

Back

Preview of the front of card 4

Card 5

Front

What is trade - Burgess Vs CIR?

Back

Preview of the front of card 5
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