As a student tax practitioner employed at TaxWise Solutions, a reputable firm located in Pretoria, you received an email from your supervisor. The email includes enquiries from three valued, long-term clients. Recognising your expertise and knowledge, your supervisor seeks your assistance in addressing these queries. From Taxsupervisor@taxwise.co.za To Taxstudent@taxwise.co.za Subject: Client Queries Query 1: Ammaara Adams, a resident of the Republic, is the proud owner of a historic building nestled in the heart of a vibrant city. The building, which has been meticulously restored and transformed into a trendy co-working space, has gained a strong reputation among entrepreneurs and freelancers seeking a vibrant and collaborative workspace. Ammaara earned rental income from hiring out workspaces in the building. There had been a growing interest from property developers who were keen on acquiring the building for redevelopment purposes, but Ammaara had no intention of selling it.

In April 2023, a prominent real estate development firm named Horizon Developers presented Ammaara with an initial offer of R10 000 000 to acquire the property and convert it into luxury condominiums. However, Ammaara remained resolute in her commitment to nurturing a thriving community of professionals within the co-working space and declined the offer. Rumours began to circulate about a major infrastructure project in the city. This included the construction of a new convention centre and an entertainment district. Ammaara enhanced her building's facilities with substantial improvements. In August 2023, official announcements confirmed the city's redevelopment plans. The proposed infrastructure project was given the green light, and property values in the area begin to soar. Ammaara engaged a professional appraiser who determined that the current market value of her property was R15 000 000. Encouraged by this valuation, she reached out to Horizon Developers and successfully negotiated a new selling price of R14 500 000. On 22 January 2024, the sale was concluded, and Ammaara received the full payment for her building. Ammaara is unsure whether the amount of R14 500 000 will be included in her gross income for the current year of assessment. Required: Q.3.1 Discuss, with reference to the gross income definition, whether the receipt of R14 500 000 by Ammaara Adams, will be included in her gross income for the 2024 year of assessment. Query 2 Siva Naidoo is a South African professional chef, renowned for his culinary expertise and participation in cooking competitions worldwide. Siva is seeking clarification on how certain receipts and expenses will be treated for income tax purposes in the current year of assessment. Background information: Siva is self-employed and has secured a sponsorship from a prominent kitchen equipment manufacturer, "MasterAid." In the sponsorship agreement, it is stipulated that Siva must showcase and use MasterAid's products during his cooking demonstrations and public appearances. Furthermore, the sponsorship requires Siva to participate in a minimum of 10 national and international culinary events annually, promoting MasterAid and wearing a chef's jacket embroidered with the company logo. Receipts in the current year: Siva received a collection of professional-grade culinary tools worth R10 000 from his sponsor, MasterAid. In addition to the sponsorship benefits, MasterAid also provided Siva with a lump sum payment of R150 000. This payment was made under the condition that he does not engage in any sponsorship agreements with competing kitchen equipment manufacturers for the next four years of his contract. During the year of assessment, Siva inherited R100 000 from his late aunt. Expense incurred in the current year: Siva invested in a comprehensive collection of professional cookware. The cookware set, known for its exceptional quality and durability, was specially designed for professional chefs. Siva made a one-time payment of R 36 000 to acquire this exclusive cookware collection. Required: Q.3.2.1 Discuss, with brief reasons, whether each of the receipts received by Siva Naidoo will be included in his gross income in the current year of assessment. Culinary tools Lump sum

Cash inheritance Q.3.2.2 Advice Siva Naidoo on whether the purchase of the cookware set will be deductible in the current year of assessment. Refer to the general deduction formula. Query 3 On 31 August 2023, Mr. Davis, who is married out of community of property to Mrs. Davis, completed and submitted his income tax return for the 2023 year of assessment. After submitting his tax return, Mr. Davis discovered that his taxable income for the 2023 year of assessment amounted to R1 580 000. However, he realised that a significant deductible medical expense of R150 000, was not allowed as a deduction by SARS in the assessment. Mr. Davis is perplexed as he believes that the expense meets all the necessary criteria for deduction according to Section 11(a). Unfortunately, the assessment provided by SARS does not offer any explanation for disallowing the deduction. Mr. Davis wants to ascertain if there were any specific circumstances or considerations that led to the disallowance of the deductible expense, as he believes it should be eligible for deduction according to the tax laws. Required: Q.3.3.1 List the administrative steps that Mr Davis should undertake to lodge an objection and appeal to the South African Revenue Services (SARS). Q.3.3.2 Advise Mr Davis on whether he should proceed directly to an objection against the assessment or whether there is another step before objecting that you could recommend.

Q.3.3.3 Provide an explanation to Mr Davis on the difference between a tax credit and a tax deduction and how they impact a taxpayer's overall tax liability.

The following tax tables are applicable for the 2024 year of assessment: The individuals' tax table for the tax period 01 March 2023 - 28 February 2024 Deemed rate per kilometer schedule for the 2023/2024 year of assessment. Medical aid tax credit rates For the taxpayer 2024 R 364 Interest exemption 2024 \begin{tabular}{|l|c|} \hline Person younger than 65 & R 23800 \\ \hline Person 65 and older & R 34500 \\ \hline \end{tabular} \begin{tabular}{|l|r|} \hline Tax Rebates \\ \hline Primary (persons younger than 65) & R 17235 \\ \hline Secondary (persons 65 and older) & R 9444 \\ \hline Tertiary (persons 75 and older) & R 3145 \\ \hline \end{tabular} \begin{tabular}{l|l|} Tax thresholds applicable to individuals and special trusts \\ \hline Under 65 & R 95750 \\ \hline 65 an older & R 148217 \\ \hline 75 and older & R 165689 \\ \hline \end{tabular} The following tax tables are applicable for the 2024 year of assessment: The individuals' tax table for the tax period 01 March 2023 - 28 February 2024 Deemed rate per kilometer schedule for the 2023/2024 year of assessment. Medical aid tax credit rates For the taxpayer 2024 R 364 Interest exemption 2024 \begin{tabular}{|l|c|} \hline Person younger than 65 & R 23800 \\ \hline Person 65 and older & R 34500 \\ \hline \end{tabular} \begin{tabular}{|l|r|} \hline Tax Rebates \\ \hline Primary (persons younger than 65) & R 17235 \\ \hline Secondary (persons 65 and older) & R 9444 \\ \hline Tertiary (persons 75 and older) & R 3145 \\ \hline \end{tabular} \begin{tabular}{l|l|} Tax thresholds applicable to individuals and special trusts \\ \hline Under 65 & R 95750 \\ \hline 65 an older & R 148217 \\ \hline 75 and older & R 165689 \\ \hline \end{tabular}