Question 1 [20 marks]

Lulama Lisbon is a 55-year-old businessman. He is running a successful Tyre repair business as a sole trader. Lulama Lisbon is considering getting married to his life partner, Ms Roberts. Lulama Lisbon is also considering appointing his partner, Ms Roberts as his assistance and paying her a high salary that would be allowed as a deduction in terms of section 11(a) in his business, this is to help him not to pay too much tax. Lulama Lisbon is aware that his proposed nuptials may have certain tax implications and he asked for your advice relating to the following items:

1) What are the tax implications for both parties should they decide to get married out of community of property?

2) What are the tax implications for both parties should they decide to get married in community of property?

3) What are the tax implications for Ms Roberts, should she receive a high salary?

4) Will Lulama Lisbon be allowed to deduct salaries in terms of section 11(a)? Required: Conduct research on the above questions to assist Lulama Lisbon with his tax affairs.

Compulsory sources to peruse: - Mohan, S. 2018. Consequences of marriage contracts - marriage contracts &divorce. TAXtalk, Volume 2018 Number 70, May / Jun 2018, p. 28 - 31 - Burman, K. 2016.Taxation 2, First Edition, Cape Town: EDGE Learning Media (Pty) Ltd, p. 171-174.

The following Learning outcomes are assessed in this question:

Describe in details the tax implication of marriage in community of property and marriage out of community of property.

Understand the general deduction formula for sole proprietor.

600-750 words