ADVANCED TAXATION

QUESTION THREE [10] Vuyo Sibiya obtained a degree in information systems and decided to open his own business. He purchased an old factory site and moved in. Business went well and he soon found that he had to improve and repair his premises. The doors were very dilapidated and had to be replaced. Vuyo decided that, instead of spending money on new doors, he would install a display window where one door had been and a single glass door where the other had been. The display window would enable customers to clearly see Vuyo's products. The cost of this installation was R30 000. The roof was made of rusty corrugated iron and leaked badly. Vuyo decided to replace it with a concrete slab at a cost of R100 000. . There had originally been three lengths of shelving affixed to the wall. The chipboard material of the shelves had swelled in the damp and become unserviceable. Vuyo had these replaced with steel shelves at a cost of R9 000 and then, at a cost of a further R7 000, extended the shelving further around the wall. . Finally, he painted the interior and exterior walls at a cost of R25 000. Required: Explain, with reasons, how much of this expenditure will be deductible in terms of section 11(d). QUESTION FOUR [10] Trading stock is regarded as a revenue asset. Lux Cars (Pty) Ltd, a company operating as a retailer of motor vehicles, purchased a motor vehicle in January 2020 for R650 000 (net of VAT) and sells it in March 2020 for R720 000 (net of VAT). The company's year of assessment ends on the last day of February each year. Required: Show the effect on taxable income of the above transactions for Lux Cars (Pty) Ltd for the 2020 and 2021 years of assessment. QUESTION THREE [10] Vuyo Sibiya obtained a degree in information systems and decided to open his own business. He purchased an old factory site and moved in. Business went well and he soon found that he had to improve and repair his premises. The doors were very dilapidated and had to be replaced. Vuyo decided that, instead of spending money on new doors, he would install a display window where one door had been and a single glass door where the other had been. The display window would enable customers to clearly see Vuyo's products. The cost of this installation was R30 000. The roof was made of rusty corrugated iron and leaked badly. Vuyo decided to replace it with a concrete slab at a cost of R100 000. . There had originally been three lengths of shelving affixed to the wall. The chipboard material of the shelves had swelled in the damp and become unserviceable. Vuyo had these replaced with steel shelves at a cost of R9 000 and then, at a cost of a further R7 000, extended the shelving further around the wall. . Finally, he painted the interior and exterior walls at a cost of R25 000. Required: Explain, with reasons, how much of this expenditure will be deductible in terms of section 11(d). QUESTION FOUR [10] Trading stock is regarded as a revenue asset. Lux Cars (Pty) Ltd, a company operating as a retailer of motor vehicles, purchased a motor vehicle in January 2020 for R650 000 (net of VAT) and sells it in March 2020 for R720 000 (net of VAT). The company's year of assessment ends on the last day of February each year. Required: Show the effect on taxable income of the above transactions for Lux Cars (Pty) Ltd for the 2020 and 2021 years of assessment