(A)

A condition for election for personal assessment is that the individual must be either a permanent or temporary resident of Hong Kong.

REQUIRED:

Define the terms "permanent resident" and "temporary resident" for the purposes of election for personal assessment under the Inland Revenue Ordinance. (3 marks)

(B)

You have been supplied with the following information in respect of the income and expenditure of Mr and Mrs Ho for the years of assessment 2017/18 and 2018/19:

Year of assessment

Income: 2017/18 2018/19

Mr Ho

(1) Rental income from Property A 96,000

Rental income from Property B 120,000

(2) Profit (loss) from his sole-proprietor business (150,000) 1,260,000

Mrs Ho

(1) Rental income from Property C 52,000

(2) Profit (loss) from her sole-proprietress business 30,000 (100,000)

Expenditure:

(1) Mortgage loan interest for the purpose of producing the income from the relevant properties:

Mr Ho: Property A 82,000

Property B 35,000

Mrs Ho: Property C 44,000

(2) Rate paid by Mr Ho: Property A 6,000

Property B 4,000

Mrs Ho: Property C 2,400

(3) Home loan interest paid by Mr Ho 98,000

(4) Cash donations to approved charitable organisations:

Mr Ho: $75,000 Mrs Ho: $35,000

Additional information:

(a) All the above properties are situated in Hong Kong.

(b) Management fee (each property at $600 per month) of all the properties are paid by the tenants.

(c) Mr and Mrs Ho elected for personal assessment for the year of assessment 2018/19. They have two children aged at 20 and 25, and they are studying full-time program in Hong Kong. Mr. Ho is living with his grandmother who is 88 years old and has been receiving allowances under the Governments Disability Allowance Scheme. Mrs Ho contributed $66,000 to support her parents in the last year. Her parents were at the age of 68 and living in Macau through out the year.

REQUIRED:

Compute the tax payable under personal assessment by Mr and Mrs Ho for the year of assessment 2018/19. You may assume that no other tax has been paid by them.

All workings must be shown.