TAX2601 Assignment 1 2026 - Distinction Due 8 April 2026

QUESTION 1 (13 marks, 16 minutes) Dzindu Properties (Pty) Ltd (Dzindu) is a South African resident company that builds and sells residential houses in and around Vhembe (Limpopo Province). The company’s financial year ends on 30 March. During a severe rainstorm in the area in November 2025, a river broke its banks and washed away several recently finished houses that were in the market for sale. The properties were totally destroyed. The development cost of the destroyed properties amounted to R2 700 000 in total. On 20 January 2026, Dzindu’s insurance company paid a total amount of R2 000 000, in full and final settlement, to Dzindu to indemnify the company for this loss. REQUIRED MARKS Discuss whether the expenditure/losses above are deductible by Dzindu Properties (Pty) Ltd in terms of the general deduction formula (section 11(a) read with section 23) for the year of assessment ending 30 March 2026. (You need to specify amounts in your discussion.) Note: • You can support the main issue in the question with relevant case law from the module's prescribed case law. • List all the requirements of the general deduction formula but note that most marks are awarded to the discussion of the requirements and the main issue in the question. 13 QUESTION 2 (13 marks, 16 minutes) Sokhaya Stores (Pty) Ltd is a company resident in South Africa. The company trades in cleaning materials. The company is not a small business corporation as defined in the Income Tax Act. Its financial year ends on 31 March 2026. You have the following information: