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?

It is considered a gain and is estimated at 20000 SR.

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?