QUESTION 2 (36 MINUTES (20 MARKS a) Selma Ndapala commenced trading on 27 February 2021. She purchased trading stock for N$20 000 on 27 February 2021. The trading stock was offered for sale at NS30000. No items were sold on 27 or 28 February 2021. Required: Calculate Selma Ndupala's taxable income for the 2021 year of assessment from the trade that she commenced on 27 February 2021. 2 marks b) On 29 February 2020. Funks (Pty) Ltd had closing stock en hund, valued at N$1 000 000 On 31 March 2020 it sold all this trading stock for NS1 500 000. Funks (Pty) Ltd deals in a rure commodity. Although further trading stock from all its possible suppliers were sought, the company did not make any purchases of trading stock during the 2021 year of assessment. The company has a February year end. Required: Calculate Funks (Pty) Ltd's taxable income from its rure commodity trade for the 2021 year of assessment 2 marks c) Dove (Pty) Ltd manufactures scotch curts. During the year of assessment, a scotch cart was transferred to the advertising department to be used for demonstration purposes. The cost of the scotch cart is N$15 000 and its market value is N$22.000 on date of change in use. The expected lifetime of a scotch cart is 10 years Required: Briefly discuss the normal tax consequences of the transfer of the scotch cart from trading stock to be used as a capital asset for demonstration purposes 2 marks d) Parrot Lid manufactures steel rods for the export market. It has a February year end. Trading stock with a cost of N$800 000 was sold to an importer in a foreign country for an amount of NS1 700 000. The goods were shipped cast insurance freight (CIF). CIF mean that the ownership only passes when the goods are off-loaded from the ship. At the end of the year of assessment ending 28 February 2021 the exported goods were not held or disposed of the reason being that the ownership has not passed yet. The goods were not included in closing stock Required: Briefly discuss how the goods in transit should be included in closing stock and when a deduction can be claimed. 3 marks c) Joseph Lupala is a Namibian resident, aged 39. He owns a bar in Katutura. Due to the good reputation and popularity of his business. Joseph needed to appoint three bouncers to ensure the safety of his customers and to minimise fights, During the 2021 year of assessment one customer had four drinks too many and started a fight with another customer. One of the bouncers tried to control the issue and stop the fight; however, he ended up having his hand broken. The fight was eventually stopped by one of the bouncers, Joseph incurred costs amounting to NS130 000 to cover the medical expenditure of the bouncer who got injured. Required: D) Discuss whether the medical expenses of NS130 000 would be deductible in Joseph Lupala's taxable income for the 2021 year of assessment, Refer to caselaw to support your answer th) Joseph Lupala wants to diversify his operations and he has heard that ring fencing of assessed losses only applies in certain circumstances. Advise him of six (6) suspect trades which are ring-fenced. 5 marks 6 marks QUESTION 2 (36 MINUTES (20 MARKS a) Selma Ndapala commenced trading on 27 February 2021. She purchased trading stock for N$20 000 on 27 February 2021. The trading stock was offered for sale at NS30000. No items were sold on 27 or 28 February 2021. Required: Calculate Selma Ndupala's taxable income for the 2021 year of assessment from the trade that she commenced on 27 February 2021. 2 marks b) On 29 February 2020. Funks (Pty) Ltd had closing stock en hund, valued at N$1 000 000 On 31 March 2020 it sold all this trading stock for NS1 500 000. Funks (Pty) Ltd deals in a rure commodity. Although further trading stock from all its possible suppliers were sought, the company did not make any purchases of trading stock during the 2021 year of assessment. The company has a February year end. Required: Calculate Funks (Pty) Ltd's taxable income from its rure commodity trade for the 2021 year of assessment 2 marks c) Dove (Pty) Ltd manufactures scotch curts. During the year of assessment, a scotch cart was transferred to the advertising department to be used for demonstration purposes. The cost of the scotch cart is N$15 000 and its market value is N$22.000 on date of change in use. The expected lifetime of a scotch cart is 10 years Required: Briefly discuss the normal tax consequences of the transfer of the scotch cart from trading stock to be used as a capital asset for demonstration purposes 2 marks d) Parrot Lid manufactures steel rods for the export market. It has a February year end. Trading stock with a cost of N$800 000 was sold to an importer in a foreign country for an amount of NS1 700 000. The goods were shipped cast insurance freight (CIF). CIF mean that the ownership only passes when the goods are off-loaded from the ship. At the end of the year of assessment ending 28 February 2021 the exported goods were not held or disposed of the reason being that the ownership has not passed yet. The goods were not included in closing stock Required: Briefly discuss how the goods in transit should be included in closing stock and when a deduction can be claimed. 3 marks c) Joseph Lupala is a Namibian resident, aged 39. He owns a bar in Katutura. Due to the good reputation and popularity of his business. Joseph needed to appoint three bouncers to ensure the safety of his customers and to minimise fights, During the 2021 year of assessment one customer had four drinks too many and started a fight with another customer. One of the bouncers tried to control the issue and stop the fight; however, he ended up having his hand broken. The fight was eventually stopped by one of the bouncers, Joseph incurred costs amounting to NS130 000 to cover the medical expenditure of the bouncer who got injured. Required: D) Discuss whether the medical expenses of NS130 000 would be deductible in Joseph Lupala's taxable income for the 2021 year of assessment, Refer to caselaw to support your answer th) Joseph Lupala wants to diversify his operations and he has heard that ring fencing of assessed losses only applies in certain circumstances. Advise him of six (6) suspect trades which are ring-fenced. 5 marks 6 marks
