QUESTION $3$a $(10$ marks$)$

You are a registered tax practitioner at $$Experts in Tax$$ and currently busy with the review of the taxable

income calculation prepared by one of your clients: Investprops $($Pty$)$ Ltd $($Investprops$),$ a South African

resident. Investprops owns investment properties from which rental income is earned. Investprops holds a

$30\%$ shareholding in Miniprops $($Pty$)$ Ltd $($Miniprops$),$ a South African resident.

Investprops supplied you with an extract of the items making up its $$income$($as they interpret it$)$ reflected

in the company$$s taxable income calculation for the year of assessment ending $31$ March $2022.$

Extract from the taxable income calculation:

Income Amount Notes Additional information

Rental income received

from tenants

R$11570000$

Amount received from

XP $($Pty$)$ Ltd

R$2400001.$ XP $($Pty$)$ Ltd is one of Miniprops$$ tenants and they

erroneously paid this amount into Investprop$$s

bank account.

Dividends received R$7000002.$ The R$700000$ is the net amount of dividends

received of R$1,2$million from Miniprops and

dividends paid of R$500000$ to Investprops$$

shareholders.

Leasehold improvements R$8600003.$ Leasehold improvements were incurred by a tenant

in accordance with the lease agreement. The lease

agreement stipulated that improvements ofR$600$

$000$ were to be effected. However, the tenant

incurred costs of R$860000.$

Total R$13370000$

REQUIRED: MARKS

Explain whether each amount should be included or not in Investprops $($Pty$)$ Ltd$$s $$income$$

$($as defined in the Income Tax Act$)$ for the $31$ March $2022$ year of assessment. No

calculations are required, but reasons should be provided in your discussion. You do not

need to refer to any case law.

The mark allocation for each item is provided below:

Item Marks

Rental sales from tenants $2$

Amount received from XP $($Pty$)$ Ltd $2$

Dividends received $3$

Leasehold improvements $3$

$10$