TAX2601 ASSIGNMENT 1 2026
DUE 8 APRIL 2026
QUESTION 1
Dzindu Properties (Pty) Ltd (Dzindu) is a South African resident company that
builds and sells residentialhouses in and around Vhembe (Limpopo Province).
The company’s financial year ends on 30 March.
Deductibility of loss of trading stock under section 11(a) read with section 23
The general deduction formula requires that expenditure or losses must satisfy all the
following criteria to be deductible:
(Learning Units 5 & 6)
Carrying on a trade - Dzindu builds and sells houses, which constitutes a trade
(Burgess v CIR).
Expenditure or loss actually incurred - The houses were destroyed in November
2025. The loss (cost of R2 700 000) was incurred at that time, even though payment
of the development cost may have occurred earlier.
During the year of assessment - The loss occurred in the year ended 30 March
2026.
In the production of income - The houses were held as trading stock for sale. The
loss is closely connected to the income-earning operations (Port Elizabeth Electric
Tramway Co Ltd v CIR).
Not of a capital nature - Trading stock is revenue in nature; its destruction does not
create an enduring benefit (New State Areas Ltd v CIR).
, No prohibition - Section 23(c) specifically deals with insured losses. It provides that
no deduction is allowed for a loss recoverable under insurance, except to the extent
that the amount recovered is less than the loss.
The insurance proceeds of R2 000 000 must be set off against the loss.
Deductible loss = R2 700 000 – R2 000 000 = R700 000
Therefore, the net loss of R700 000 is deductible under section 11(a) read with section
23(c).
QUESTION 2 (13 marks)
(a) First provisional tax payment – due 31 August 2025
Year of Reason Basic Tax @ 27% First
assessment amount / payment
estimate (50%)
2023 Assessed 20 Aug 2023 R3 100 000 R837 000 R418 500
(>14 days before 31 Aug
2025). Period from 31 Mar
2023 to 31 Mar 2026 >18
months, so adjust by 8%
p.a. for 3 years:
R2 500 000 + (R2 500 000
× 8% × 3) = R3 100 000
(b) Second provisional tax payment – due 31 March 2026
DUE 8 APRIL 2026
QUESTION 1
Dzindu Properties (Pty) Ltd (Dzindu) is a South African resident company that
builds and sells residentialhouses in and around Vhembe (Limpopo Province).
The company’s financial year ends on 30 March.
Deductibility of loss of trading stock under section 11(a) read with section 23
The general deduction formula requires that expenditure or losses must satisfy all the
following criteria to be deductible:
(Learning Units 5 & 6)
Carrying on a trade - Dzindu builds and sells houses, which constitutes a trade
(Burgess v CIR).
Expenditure or loss actually incurred - The houses were destroyed in November
2025. The loss (cost of R2 700 000) was incurred at that time, even though payment
of the development cost may have occurred earlier.
During the year of assessment - The loss occurred in the year ended 30 March
2026.
In the production of income - The houses were held as trading stock for sale. The
loss is closely connected to the income-earning operations (Port Elizabeth Electric
Tramway Co Ltd v CIR).
Not of a capital nature - Trading stock is revenue in nature; its destruction does not
create an enduring benefit (New State Areas Ltd v CIR).
, No prohibition - Section 23(c) specifically deals with insured losses. It provides that
no deduction is allowed for a loss recoverable under insurance, except to the extent
that the amount recovered is less than the loss.
The insurance proceeds of R2 000 000 must be set off against the loss.
Deductible loss = R2 700 000 – R2 000 000 = R700 000
Therefore, the net loss of R700 000 is deductible under section 11(a) read with section
23(c).
QUESTION 2 (13 marks)
(a) First provisional tax payment – due 31 August 2025
Year of Reason Basic Tax @ 27% First
assessment amount / payment
estimate (50%)
2023 Assessed 20 Aug 2023 R3 100 000 R837 000 R418 500
(>14 days before 31 Aug
2025). Period from 31 Mar
2023 to 31 Mar 2026 >18
months, so adjust by 8%
p.a. for 3 years:
R2 500 000 + (R2 500 000
× 8% × 3) = R3 100 000
(b) Second provisional tax payment – due 31 March 2026
