Question 3 (33 Marks) Eddy Vries, a resident of RSA, was employed by Prices Candles Ltd as its transport manager. During the 2016 year of assessment he was employed from 1 March 2015 to 30 September 2015 (the date of his death). Eddy died in a motor vehicle accident at the age of 33. In March 2015, his salary was R20 000. From April 2015 to September 2015 he earned a salary of R22 000 per month. He was also paid an entertainment allowance by Prices Candles Ltd of R1 000 per month from 1 March 2015. He was a member of the Prices Candles Pension Fund. As from 1st April 2015 he contributed R2 100 per month. His contribution for March 2015 was R1 900. The contributions are solely based on his salary. R5 000 in respect of past period contributions were made. Following upon his death, Maike (to whom he was married out of community of property), received a lump sum of R750 000 from the pension fund. In terms of the Second Schedule of the Income Tax Act, R300 000 of this amount is exempted from tax. Commencing from October 2015, she was awarded a monthly annuity of R4 500. Maike acquired 3% of the shares in a Namibian company and earned R6 000 in dividends. During the previous year of assessment Eddy had inherited a rent producing property. For the period 1 March 2015 to 30 September 2015 Eddy earned net rentals of R84 000 from this property. This property was bequeathed to his wife. From 15 October 2015 to 28h February 2016 she earned net rentals of R60 000 from the property. Eddy owned a 2nd property which he sold to his son, John (14 years old) for R1 500 000. He lent the money interest free to his son. His son entered into a lease agreement and earned R80 000. John in addition received income of R50 000 from acting in a Colgate advert. Interest of R24 500 and local dividends of R3 000 accrued to Eddy during the period March 2015 to 30 September 2015. Eddy incurred entertainment expenditure of R3 800 in relation to his trade as transport manager. Eddy made a R7 000 qualifying donation to a public benefit organisation. He obtained the necessary certificate. 7 Maike, a paraplegic, did not work while Eddy was alive. From 1st November 2015, she took up employment and received a salary of R20 000 per month. Besides this salary, the monthly amount from the pension fund and net rentals from the property, she had no other receipts or accruals for the year of assessment. Required: a) Calculate the normal tax payable by Eddy for the 2016 year of assessment (20 marks) and; b) the normal tax payable by Maike for the 2016 year of assessment (9 marks), c) The normal tax payable by John for the 2016 year of assessment (3 marks). When an amount is excluded from your calculation the reason for such treatment will earn marks. All amounts should be rounded off to the nearest R. ANNEXURE: TAX TABLES Not exceeding R181 900 Exceeding R181 900 but not R284 100 Exceeding R284 100 but not R393 200 Exceeding R393 200 but not R550 100 18% R32 742 plus 26% of amount exceeding R181 900 R59 314 plus 31% of amount exceeding R284 100 R93 135 plus 36% of amount exceeding R393 200 R149 619 plus 39% of amount exceeding R550 100 R208 587 plus 41% of amount exceeding R701 300 Exceeding R550 100 but not R701 300 Exceeding R701 300 R13 257 R7 407 R2 466 Rebates Primary rebate Secondary rebate (65 years and older) Tertiary Rebate (75 years and older) Tax thresholds - 2016 Persons under 65 years old Persons older than 65 but younger than 75 Persons older than 75 Interest exemption - 2016 Persons under 65 years old Persons older than 65 years old R73 650 R114 800 R128 500 R23 800 R34 500 Question 3 (33 Marks) Eddy Vries, a resident of RSA, was employed by Prices Candles Ltd as its transport manager. During the 2016 year of assessment he was employed from 1 March 2015 to 30 September 2015 (the date of his death). Eddy died in a motor vehicle accident at the age of 33. In March 2015, his salary was R20 000. From April 2015 to September 2015 he earned a salary of R22 000 per month. He was also paid an entertainment allowance by Prices Candles Ltd of R1 000 per month from 1 March 2015. He was a member of the Prices Candles Pension Fund. As from 1st April 2015 he contributed R2 100 per month. His contribution for March 2015 was R1 900. The contributions are solely based on his salary. R5 000 in respect of past period contributions were made. Following upon his death, Maike (to whom he was married out of community of property), received a lump sum of R750 000 from the pension fund. In terms of the Second Schedule of the Income Tax Act, R300 000 of this amount is exempted from tax. Commencing from October 2015, she was awarded a monthly annuity of R4 500. Maike acquired 3% of the shares in a Namibian company and earned R6 000 in dividends. During the previous year of assessment Eddy had inherited a rent producing property. For the period 1 March 2015 to 30 September 2015 Eddy earned net rentals of R84 000 from this property. This property was bequeathed to his wife. From 15 October 2015 to 28h February 2016 she earned net rentals of R60 000 from the property. Eddy owned a 2nd property which he sold to his son, John (14 years old) for R1 500 000. He lent the money interest free to his son. His son entered into a lease agreement and earned R80 000. John in addition received income of R50 000 from acting in a Colgate advert. Interest of R24 500 and local dividends of R3 000 accrued to Eddy during the period March 2015 to 30 September 2015. Eddy incurred entertainment expenditure of R3 800 in relation to his trade as transport manager. Eddy made a R7 000 qualifying donation to a public benefit organisation. He obtained the necessary certificate. 7 Maike, a paraplegic, did not work while Eddy was alive. From 1st November 2015, she took up employment and received a salary of R20 000 per month. Besides this salary, the monthly amount from the pension fund and net rentals from the property, she had no other receipts or accruals for the year of assessment. Required: a) Calculate the normal tax payable by Eddy for the 2016 year of assessment (20 marks) and; b) the normal tax payable by Maike for the 2016 year of assessment (9 marks), c) The normal tax payable by John for the 2016 year of assessment (3 marks). When an amount is excluded from your calculation the reason for such treatment will earn marks. All amounts should be rounded off to the nearest R. ANNEXURE: TAX TABLES Not exceeding R181 900 Exceeding R181 900 but not R284 100 Exceeding R284 100 but not R393 200 Exceeding R393 200 but not R550 100 18% R32 742 plus 26% of amount exceeding R181 900 R59 314 plus 31% of amount exceeding R284 100 R93 135 plus 36% of amount exceeding R393 200 R149 619 plus 39% of amount exceeding R550 100 R208 587 plus 41% of amount exceeding R701 300 Exceeding R550 100 but not R701 300 Exceeding R701 300 R13 257 R7 407 R2 466 Rebates Primary rebate Secondary rebate (65 years and older) Tertiary Rebate (75 years and older) Tax thresholds - 2016 Persons under 65 years old Persons older than 65 but younger than 75 Persons older than 75 Interest exemption - 2016 Persons under 65 years old Persons older than 65 years old R73 650 R114 800 R128 500 R23 800 R34 500