Mr To, Mr Ip and Mr Ma are partners in a Hong Kong business sharing profits and losses in the

ratio of 2:1:1. The assessable profit of the business for the year of assessment 2017/18 is $500,000, after adding back salaries of $240,000, $160,000 and $200,000 payable to Mr To, Mr Ip and Mr Ma respectively.

Mr To and Mr Ip have elected for personal assessment for the year of assessment 2017/18.

You have been supplied with the following additional information in respect of Mr To for the year

ended 31 March 2018:

(1) Rental income from Property A

Property A was let to Mr Chiu under the following terms:

Lease period: 1 October 2016 to 30 September 2018 (2 years)

Monthly rent: $12,000 payable on the first day of each month

Premium: $160,000 payable on 1 October 2016

Rates: $1,200 per quarter payable by tenant

Management fee: $800 per month payable by tenant

(2) Director's fee from a Hong Kong company: $120,000

(3) Assessable profit from his solely-owned business in Hong Kong: $800,000 (after

deduction of approved charitable donations of $50,000)

(4) Share of loss from another partnership business in Hong Kong: ($150,000)

Mr To paid the following expenses:

(1) Mortgage loan interest to finance the purchase of Property A to a local bank in Hong Kong:

$60,000

(2) Mortgage loan interest to a bank in Hong Kong in respect of his residential property:

$120,000

The residential property is jointly owned with his wife as joint tenant.

(3) Fees paid to a recognised residential care home which provided residential care to his

father who is aged 70: $84,000

(4) Cash donation to Tung Wah Group of Hospitals: $480,000 (not including the donations of

$50,000 allowed under profits tax)

Mrs To is a housewife. Mr and Mrs To have two sons aged 6 and 8. During the year of

assessment 2017/18, Mrs To only received dividend income of $12,000 from a private company

in Hong Kong. She has a loss of $50,000 brought forward under personal assessment from the

year of assessment 2016/17. Mrs To does not nominate Mr To to claim deduction of her share

of home loan interest.

REQUIRED:

(a) Compute the profits tax liability of the partnership business of Mr To, Mr Ip and Mr Ma for the

year of assessment 2017/18. Ignore provisional profits tax.

(b) Compute the net assessable value of Property A for the year of assessment 2017/18.

(c) Compute the tax payable under personal assessment by Mr To for the year of assessment

2017/18.