Question 4 (15 marks) Mr Wong acquired an office located in Kwun Tong in May 2018 and leased it out on 1 July 2018. The following information is provided in respect of the lease of the property: (1) Term of lease: two years from 1 July 2018. (2 Rent: $40,000 per month payable in advance. (3) Rent free period: 1 July 2018 to 31 July 2018. (4) Rental deposit: $80,000 payable on 1 July 2018. As per lease agreement, the rental deposit will be used to compensate Mr Wong for any loss of revenue if the tenant defaults on the payment of rent. (5) Initial premium: $60,000 payable on 1 July 2018. (6) Rates: $2,400 per quarter, payable by Mr Wong. (7) Management fee: $2,600 per month, payable by the tenant directly to the management company. (8) Agency fee: $20,000 paid by Mr Wong on 1 July 2018. From 1 March 2019 onwards, the tenant failed to pay the rent and the management fee. On 30 September 2019, the tenant moved out of the property and could no longer be contacted. Mr Wong was required to pay the overdue management fee from March 2019 onwards. The office was then left vacant. In October 2019, Mr Wong placed the office for sale at a price of $6,000,000 with a few property agents and successful sold the office for $5,800,000 on 30 October 2019. Required: (a) Prepare the property tax assessment for Mr Wong for the years of assessment 2018/19 and 2019/20. (11 marks) Note: You should ignore provisional tax and rates concession. (b) Based on the Stamp Duty Ordinance and the prevailing practice of the Inland Revenue Department, compute the amount of stamp duty arising from the sale of the office and advise who is liable for the stamp duty. State also whether special stamp duty and buyer's stamp duty are applicable. (4 marks) [Total for Question 4: 15 marks) Question 4 (15 marks) Mr Wong acquired an office located in Kwun Tong in May 2018 and leased it out on 1 July 2018. The following information is provided in respect of the lease of the property: (1) Term of lease: two years from 1 July 2018. (2 Rent: $40,000 per month payable in advance. (3) Rent free period: 1 July 2018 to 31 July 2018. (4) Rental deposit: $80,000 payable on 1 July 2018. As per lease agreement, the rental deposit will be used to compensate Mr Wong for any loss of revenue if the tenant defaults on the payment of rent. (5) Initial premium: $60,000 payable on 1 July 2018. (6) Rates: $2,400 per quarter, payable by Mr Wong. (7) Management fee: $2,600 per month, payable by the tenant directly to the management company. (8) Agency fee: $20,000 paid by Mr Wong on 1 July 2018. From 1 March 2019 onwards, the tenant failed to pay the rent and the management fee. On 30 September 2019, the tenant moved out of the property and could no longer be contacted. Mr Wong was required to pay the overdue management fee from March 2019 onwards. The office was then left vacant. In October 2019, Mr Wong placed the office for sale at a price of $6,000,000 with a few property agents and successful sold the office for $5,800,000 on 30 October 2019. Required: (a) Prepare the property tax assessment for Mr Wong for the years of assessment 2018/19 and 2019/20. (11 marks) Note: You should ignore provisional tax and rates concession. (b) Based on the Stamp Duty Ordinance and the prevailing practice of the Inland Revenue Department, compute the amount of stamp duty arising from the sale of the office and advise who is liable for the stamp duty. State also whether special stamp duty and buyer's stamp duty are applicable. (4 marks) [Total for Question 4: 15 marks)
