Multiple Choice Questions

1 Capital allowances include two components, namely:

I initial allowance

II Industrial building allowance

III Investment allowance

IV annual allowance

A I, II

B I, III

C I, IV

D III and IV

2 The test for "plant" includes:

I Must not be part of the premises

II Must have been acquired by the taxpayer for at least one year

III Must not be stock in trade

IV Must be used to carry on the business

A I, II, IV

B I, III, IV

C II, III, IV

D All of the above

3 Which of the following do NOT qualify for capital allowance?

A plant

B Machines

C Rental

D Furniture

4 Which of the following statements is NOT true?

A Initial allowance is a flat rate give every year based on the original cost of the asset.

B The purpose of capital allowance is to give a relief for wear and tear of fixed assets for business.

C Capital allowance is only applicable to business activity and not for individuals.

D Capital allowances and charges are provided in Schedule 3 of the Income Tax Act 1967.

5 Which of the following statements are TRUE?

I Capital allowances are given only in respect of a business source and only for the person who incurs the qualifying expenditure.

II Capital allowance is computed for a year of assessment and is deducted from the adjusted income of the business in arriving at statutory income.

III Capital allowance is provided for plant and machinery.

IV A person deriving employment income can claim capital allowances on machinery from that employment income.

A I, II only

B I, II, III only

C III only

D All of the above

6 Given:

Qualifying expenditure for non-commercial vehicles -

Vehicle type

Maximum limit on qualifying expenditure

New vehicles purchased for a not more than RM150,000

RM100,000

Other vehicles

RM50,000

JustOne Sdn Bhd bought a reconditioned car for business purposes for RM80,000. The car was re-fitted with high-quality spare parts and made into a reconditioned vehicle. What would be the capital allowance computation?

A RM100,000

B RM80,000

C RM50,000

D RM16,000

7 Which of the following is true concerning the basis period for capital allowances?

I Follows the basis period of the business

II If expenditure is incurred before the commencement date of the business, it is deemed incurred on the date of commencement

III In the case of overlapping period, initial allowance is to be claimed in the earlier year of assessment

A I only,

B II only

C I, II only

D I, II, III

8 Which of the following statements concerning annual allowance is NOT true?

A Cannot be claimed if the asset is temporarily not in use.

B It is claimed annually on a straight line basis.

C Commences in the basis year for the year of assessment in which the qualifying capital expenditure is incurred.

D Continues to be given in the following and subsequent years of assessment until the qualifying expenditure is fully written off or when the plant/machinery is sold.

9 JustThree Sdn Bhd bought a new machine costing RM500,000. Assuming initial allowance and annual allowance rates for both is 20%, what is the capital allowance for the first year?

A RM500,000

B RM250,000

C RM200,000

D Not eligible to claim capital allowance