Q1. Discuss the types of activities that are considered taxable, and what types of income are considered tax exempted. (answer in your own words DO NOT copy from any source). (2 Marks)

Q2. Answer the following questions: (0.5 Mark each)

1. A taxpayer dispose of an asset by gift with a Cost base of 50,000 SR. The market value of those assets at the time of disposal is 70,000 SR.

Required:

What is gain or loss on the asset disposed of and determine whether or not the gain taxable and the loss deductible?

2. In 2015, a taxpayer purchased a piece of land for 100,000 SR and in 2020; he incurred expenses of 30,000 SR to improve the land. In 2020, he sold the land for 150,000 SR.

Required:

What is gain or loss on the asset disposed of and determine whether or not the gain taxable and the loss deductible?

3. A taxpayer disposed a part of asset for 100,000 SR in cash. The taxpayer purchased that asset for 90,000 SR 5 years ago but the market value of the complete assets was as follows:

Part disposed 100,000

Retained part 150,000

Total 250,000

Required:

Calculate the cost base of the disposed asset and the gain of the disposal.

4. In 2019, a taxpayer sold a merchandise for 100,000 SR on credit, but he did not report that sales in his tax return. In 2020, it is proved that impossibility of collecting receivable accounts.

Required:

Is taxpayers bad debt deductible or not?

5. In 2019, a taxpayer sold a merchandise for 100,000 SR on credit and he reported that sales in his tax return. In 2020, it is proved that impossibility of collecting receivable accounts.

Required:

Is taxpayers bad debt deductible or not?

6. A taxpayer applied depreciation rates of 10% on his assets using straight-line method. While depreciation rate by tax law is 15%.

Required:

What is the effect of that transaction on the tax base?