Income

Sales:

Cattle

$1$

$1285000$

Maize

$1550000$

$2835000$

Expenditure

Salaries and wages

$665000$

Cost of transporting cattle to the abattoir

$26900$

Electricity and fuel

$267000$

Feed for animals

$193000$

Seed and fertiliser

$145000$

Other farm expenses $($all tax deductible$)$

$139719$

Soil erosion prevention

$65675$

New dam

$2$

$85000$

Farm office conversion

$3$

$68750$

Purchase of personal computer

$8$

$60000$

Purchase of bus

$9$

$999000$

Purchase of combine harvester

$10$

$1428000$

Interest on land bank loan

$160000$

$4303044$

Notes:

In August $2023,$ Henk was forced to sell $30$ heads of cattle because of severe drought conditions. He received R$425000$ from the sale, which is included in the amount of R$1285000$ shown above as income from cattle sales. The remaining cattle sales were made to the local abattoir.

During May $2023,$ Henk decided to build an additional dam on his farm. The total cost of the dam was R$145000$ and Henk received a subsidy of R$60000$ from the government towards the cost of the dam.

Henk had an old, disused cottage on the farm that was built at a cost of R$75000$ in $2001.$ Henk decided to convert it into a farm office. The conversion was completed, and the office was brought into use on $1$ November $2023.$

The opening and closing stock of livestock and produce, which is not included in the income and expenditure statement above, was as follows:

Opening stock

Closing stock

Bulls

$10$

$5$

Cows

$150$

$90$

Heifers

$320$

$105$

The standard values and market values of the livestock are as follows:

Standard value

Market value per head

R

R

Bulls

$50$

$100000$

Cows

$40$

$30000$

Heifers

$30$

$18000$

On $28$ February $2023,$ the market value of harvested maize on hand was R$610000$ and the cost of production was R$250000.$ The market value of maize not yet harvested on $28$ February $2023$ was R$850000$ and the cost of production was R$260000.$

On $29$ February $2024,$ the market value of harvested maize on hand was R$745000$ and the cost of production was R$275000.$ The market value of maize not yet harvested on $29$ February $2024$ was R$980000$ and the cost of production was R$285000.$

The bookkeeper has advised you that during the $2024$ year of assessment Henk inherited $7$ bulls. He donated $2$ cows to the local school $($not a PBO$)$ for its fete, $3$ bulls were slaughtered for rations for farm labourers and $2$ bulls were slaughtered for consumption by Henk and his family. The slaughtered bulls had been purchased at a cost of R$63000.8$ cows died from natural causes.

The new personal computer brought into use on $1$ December $2023$ and is used in the farm office for preparing financial and other records for the farm.

Henk purchased a $20-$seater bus at a cost of R$999000($including VAT$),$ for use in transporting farm workers from their homes to the farm and back again. The bus was brought into use on $1$ July $2023.$

On $25$ February $2023$ Henk purchased and brought into use a new combine harvester for R$1428000($including VAT$).$ The bookkeeper has not calculated any allowances on the combine harvester.

Henk raised a loan from the Land Bank to fund his capital purchases. Interest on the loan for the year is R$160000.$ Henk did not make any repayments on the loan during the year.

SARS accepts the following write$-$off periods $($BGR $7)$:

Type of asset

Write off period

$($years$)$

Personal computers $3$

Combine harvesters $6$

Passenger buses $4$

Source: Arendse, J$.2024$

Required:

Calculate the taxable income of Henk Marlow for the year of assessment ended $29$ February $2024.$