TAX2601 Assignment 1 {COMPLETE ANSWERS} Semester 1 2026 - Due Date 8 April 2026

, TAX2601 ASSIGNMENT 1 SEMESTER 1 2026

DUE DATE: 8 APRIL 2026




QUESTION 1:

Dzindu Properties (Pty) Ltd (Dzindu) is a South African resident company carrying on a trade
of property development. The issue is whether the loss of destroyed houses and the related
insurance recovery are deductible under section 11(a) read with section 23 of the Income
Tax Act 58 of 1962 for the year of assessment ending 30 March 2026.




1. Requirements of the general deduction formula (section 11(a) read with section 23)

 For an amount to be deductible, the following requirements must be met:


 Firstly, the expenditure or loss must be actually incurred during the year of assessment.


 Secondly, it must be incurred in the production of income.


 Thirdly, it must be of a revenue nature and not capital in nature.


 Fourthly, it must be incurred in the carrying on of a trade.


 Fifthly, it must not be of a domestic or private nature as prohibited by section 23(a).


 Lastly, it must not fall under section 23(g), meaning it must be laid out for the purposes


of trade.