PART A

Jack Brown, a resident of the Republic, has been achieving a reasonable return from the

letting of a block of $15$ flats that he purchased in $1993.$ He does not have a history of

property dealing.

Jack is aware that he can make a substantial profit by selling the $15$ flats individually. He has

made application for a sectional title register to be opened.

To make the flats more attractive to would would$-$be purchasers, Jack is considering

improving them.

Required: Discuss with reasons whether Jack Brown$$s receipt or accrual from the sale of

the flats is of a revenue nature. Deal with the position when the flats are sold individually

without improvements being made to them, and the position when the flats are first

improved, and then sold. $(20$ marks$)$

PART B

Berea Football $($Pty$)$ Limited, a resident of the Republic, owns the Berea football team. It

recently sold two of its players, namely, Ace Ball and King Foot to Westville Football $($Pty$)$

Limited.

Ace Ball was sold by Berea Football $($Pty$)$ Limited for R$5000000$ and King Foot was sold for

R$25000.$

$$ Ace Ball has started playing for the Berea football team eight years ago in its under$14$ team and, after signing a life$-$service contract, had been trained by Berea Football

$($Pty$)$ Limited$$s trainers until he was considered to be the number one $$striker$$ in the

country.

$$ King Foot had been snapped up by Berea Football $($Pty$)$ Limited at a bargain price

from Has$-$been Football Club for R$3000.$ When $$purchasing$$ King Foot, its board of

directors realized he would not suit its style of play, but anticipated being able to $$sell$$

him at a quick profit. This it succeeded in doing, only eight weeks after purchasing

him.

Required: Discuss what amount, if any Berea Football $($Pty$)$ Limited must include in its gross

income. Assume that the receipts and accruals of Berea Football $($Pty$)$ Limited are not

exempt from normal tax and ignore a possible inclusion in its taxable income under

section $26$A $($being a taxable capital gain$).(20$ marks$)$