TAX2601 Assignment 1 (QUALITY ANSWERS) Semester 1 2026

This document provides detailed workings, clear explanations, and well-structured solutions for the TAX2601 Assignment 1 (QUALITY ANSWERS) Semester 1 2026 - For assistance call or Whats-App us on 0.8.1..2.7.8..3.3.7.2. .. 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: Year of assessment Taxable income Date of assessment 2023 R2 500 000 20 August 2023 2024 R2 900 000 27 September 2025 2025 R3 400 000 10 April 2026 2026 R3 800 000 Estimated – not yet assessed REQUIRED MARKS a) Calculate the first provisional tax payment for Sokhaya Stores (Pty) Ltd for its 2026 year of assessment to ensure that the company does not incur any underestimation penalties. b) Calculate the second provisional tax payment for Sokhaya Stores (Pty) Ltd for its 2026 year of assessment to ensure that the company does not incur any underestimation penalties. Note: • Provide a reason for all the amounts used, explaining whether they may be used as the basic amount, and specify any adjustments made (if any) in calculating the basic amount. 9 4 Downloaded by Edge Tutor () lOMoARcPSD| TAX2601/2026/S1/ Assessment 1 Page 4 of 6 QUESTION 2 (continued) • Clearly indicate on which date the payments must be made. • The answer must be presented in the format explained below. Answers presented in a written paragraph or discussion format will not be considered or marked. First / second provisional tax payment -Date of payment: Year of assessment Reason 2026 2025 2024 2023 QUESTION 3 (32 marks, 38 minutes) Bata Thabo Installers (Pty) Ltd (Bata) sells and installs air-conditioning systems. The company has a financial year ending on 28 February 2026. Bata is a small business corporation (as defined). The following information is provided for the company’s 2026 financial year: Income / Expenditure / Provision Notes R Sales 1 5 986 000 Local dividend received 120 000 Bad debts recovered 65 000 Provision for doubtful debts 2 80 000 Purchases and trading stock balances 3 see note Gross salaries paid 2 620 000 Insurance paid 4 210 000 Contributions made to the employees’ pension fund 5 265 000 Annuities paid 6 50 000 Provisional tax, penalties and interest paid 7 341 930 Donations made 8 185 000 Notes: 1. Included in the sales amount is R1 520 000 of credit sales for which payment has not yet been received on 28 February 2026. (Provide a reason for your answer). Downloaded by Edge Tutor () lOMoARcPSD| TAX2601/2026/S1/ Assessment 1 Page 5 of 6 QUESTION 3 (continued) 2. The doubtful debt allowance claimed for the 2025 year of assessment was R50 000. The company applies IFRS 9 for financial reporting purposes. The debtors who may default on their payments for the next 12 months were assessed and are expected to amount to R120 000. 3. The opening balance for trading stock on 1 March 2025 was R687 000. Raw materials of R1 485 300 were purchased during the year. The cost price of the closing balance for trading stock at the end of the year is R854 200, and the market value is R825 300. 4. The insurance premium is paid in advance and covers the period from 1 January 2026 to 31 December 2026. (Provide a reason for your answer). 5. Bata’s employees belong to the company’s pension fund, and the company contributes to this fund for the benefit of the employees. During the year, the company contributed R265 000 to the pension fund. 6. An annuity of R25 000 was paid on 1 June 2025 to a dependent of a previous employee. The employee was a cleaning lady who resigned on 30 April 2025 in order to take up a better-paying job. The company decided to continue paying the annuity for three years (up to 2027) to assist the dependent in obtaining a tertiary qualification. The amount is not a bursary. 7. Provisional tax payments, penalties, and interest were made as follows: 7.1 The second provisional tax payment of R55 000 for the 2025 year of assessment was only made on 3 March 2025. 7.2 A penalty amounting to R5 700 was paid on the late payment of the second payment mentioned above as well as interest amounting to R230 on 30 April 2025. 7.3 The third/top-up provisional tax payment of R27 000 for the 2025 year of assessment was made on 30 September 2025. 7.4 The first provisional tax payment of R62 000 for the 2026 year of assessment was made on 31 August 2025 and the second payment of R192 000 was made on 22 February 2026. 8. A donation of R185 000 was made to Dogs-for-life, a registered public benefit organisation on 1 February 2026. A section 18A receipt was obtained. R22 000 was brought forward from the 2025 year of assessment for qualifying (deductible) donations that were not allowed as a deduction as it exceeded the monetary limit for that year. REQUIRED MARKS (a) Calculate Bata Thabo Installers (Pty) Ltd’s taxable income for its 2026 year of assessment. Notes: • Your calculation MUST be presented in a table format (item description and calculations on the left and final amount to be added to/deducted from taxable income on the right). • Ignore any capital gains tax consequences. • Show amounts that are deductible in terms of different sections of the Income Tax Act in separate lines in the answer. 28 Downloaded by Edge Tutor () lOMoARcPSD| TAX2601/2026/S1/ Assessment 1 Page 6 of 6 QUESTION 3 (continued) • Assume that the taxpayer always elects to utilise any available options in terms of the Income Tax Act to legally minimise its normal tax liability. • Provide brief reasons in the body of your calculation (not as a separate note elsewhere in your answer) for the treatment of transactions 1 and 4. • NO MARKS WILL BE GIVEN FOR ANSWERS IN ESSAY FORMAT OR CONTAINING LONG EXPLANATIONS THAT YOU OBTAIN OR COPY FROM AI PLATFORMS. (b) Use the same information as for (a) but assume that Bata Thabo Installers (Pty) Ltd’s taxable income for its 2026 year of assessment amounted to R1 700 000. Calculate the net normal tax payable by/refundable to the company. Notes: • Your calculation MUST be presented in a table format (item description and calculations on the left and final amount to be added to/deducted from taxable income on the right).