LML4804 ASSIGNMENT 1 SEMESTER 2 2020.

1.1 The purchase price of the bricks will be included in Mr Nkomo’s gross income once it is accrued to him.The amount can be taxed either on receiving it or on its accrual. In Lategan v CIR the court held that, 1 the taxpayer is entitled to an accrued amount and the amount, which is payable in future, its present discounted value, and not its full amount, be included in the gross income. In CIR v Peoples Stores, 2 the taxpayer sold goods on cash and credit. Goods that was sold on credit was only payable in the following year of assessment. because the taxpayer has a vested right in the income that is payable in the following year it has to be included in the current year of assessment. In the event that there are suspense conditions contained in the agreement, the said entitlement to payment can only vest once the suspensive conditions are fulfilled. Thus, a taxpayer’s entitlement to payment vested at the date of the fulfilment of any suspensive conditions to which the agreement was subject, or the date upon which the taxpayer obtained the statutory permissions necessary to enable it to tender transfer, whichever occurred later. Thus since the case was resolved in Mr Nkomo’s favour in May 2020, that it is when it accrued to him. Therefore that is when the purchase price of the bricks will be included in Mr Nkomo’s gross income. 1.2 In respect to South African residents, the general requirements of the definition of gross income as set out in section 1 of the Act provide that, gross income with regard to a year or period of assessment is the total amount whether in cash or otherwise, that is received by or accrues to such resident during the year of assessment, excluding receipts or accruals of a capital nature.3 From the facts in Mr Hassani’s case, it is not in dispute that he received an amount. What is in dispute is whether the receipt is of a capital or revenue nature.