LML4804 Assignment 1 Sem 1 2022

LML4804 Assignment 1 Sem 1 2022. Question 1 In order to advise Mofokeng if the proceeds of the sale of the fixed property must be included in his gross income for the 2016/2017 year of assessment one has to start by analysing the definition of gross income and it various aspects. “Gross Income” “Gross income” is defined in Section 1 of the Income Tax Act 58 of 1962 which reads as follows: “‘gross income’ in relation to any year or period of assessment, means, i) in the case of any resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such resident, or ii) in the case of any person other than a resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such person from a source within the Republic, during such year or period of assessment, excluding receipts or accruals of a capital nature, but including, without in any way limiting the scope of this definition, such amounts (whether of a capital nature or not) so received or accrued as are described hereunder” 1 . From the facts in the question and the definition it is clear that in order to determine if the proceeds forms part of Mofokeng’s “gross income” one has to determine:  whether or not the proceeds is an amount in cash or otherwise;  was Mofokeng is a resident for income tax purposes;  if the proceeds accrued to Mofokeng during the 2016/2017 year of assessment;  if the proceeds for the sale of the fixed property was capital in nature;  if the proceeds are of a capital nature; and  if there is any special inclusions for the amount in gross income. An amount in cash or otherwise Even though the definition of “gross income” specifically states “the total amount, in cash or otherwise” the definition would have included not only money but also the monetary value of property, corporeal or incorporeal, as the term “amount” includes both. In the case of CIR v Delfos the court held that “…tax is to be assessed on all receipts and accruals having a money value…” 2 . From the Lace Proprietary Mines Ltd v CIR case is clear that the general principle is, that if a taxpayer receives an amount 1 Section 1 of the Income Tax Act 58 of 1962 2 SILKE: Income Tax Volume 1 16 other than in cash, the market value of such asset should be included in the taxpayer’s gross income3 . As the facts in the question clearly state that the proceeds of the farm is R 7,650,000 there is no question that the proceeds does not have a monetary value. An amount received by or accrued to in favour of the Mofokeng From the definition it is clear that a person must receive an amount or an amount accrues to the person for it to be included in his “gross income”. In the absence of such a receipt or accrual, or any special provisions no amount can be included in the person’s “gross income”4.