Question 3 (30 marks) (i) Mr. Cheng was a sales manager of Tai Shan Toys Company Limited (the company). In recognition of his service for past 10 years, he was allotted an option to acquire 3,000 of the company's shares at $2 per share on 30 September 2015 when the market value was $10 per share. He had to pay an option fee of $1,200. On 15 March 2016, he exercised his right to acquire 1,000 of the company's share when the market value was $15 per share. There was a legal expense of $300. On 1 June 2016, he disposed of 1,000 shares at $30 per share and also the remaining option for purchasing 2,000 shares for a consideration of $35,000. (ii) During the year ended 31 March 2017, Mr. Cheng received a monthly salary of $30,000 with one-month double pay in December 2016. He was also granted a contract gratuity of $120,000 after completing his 3rd contract of employment on 31 December 2016. The contract covered from 1 January 2015 to 31 December 2016. (iii) According to the contract, he was entitled to a free trip with his wife of no more than $30,000. Mr. Cheng spent the Christmas holiday with his wife in Rome during the Chinese New Year in February 2017, which cost him $33,000 in total. (iv) Mr. Cheng used his private car for both business purpose and private use. He estimated the proportion to be 80:20. During the year ended 31 March 2017, he incurred $50,000 on petrol and repairs. All were reimbursed by Tai Shan Toys Company Limited. (v) Mr. Cheng was selected to attend a seminar in Paris on behalf of the company in July 2016. The trip expenses, including air-tickets, hotel accommodation and other expenses, totaled $100,000. All were paid by the company. (vi) During the annual party held by the company in Christmas 2016, Mr. Cheng won the grand prize, which was a gold watch of $100,000. (vii) To commemorate his 10-year service, the company presented him a gold watch in January 2017, the market value of which was $80,000. Required: (1) Comment on the taxability of each of the above items. (7 marks) (2) Calculate Mr. Cheng's taxable income for the year of assessment 2016/17. (23 marks)