Question 4 [30 marks) (54 minutes) Encik Tajuddin owned the following three (3) properties. He provides active and comprehensive maintenance and support services to the properties. The rental status of these properties for the year ended 31 December 2018 are as follows:- RM 7,200 900 Rental: Apartment (1st time rental) January 2018 to December 2018 (RM600 per month) Rental Deposit -refundable Expenses Commission to real estate agent for finding new tenant Interest on loan (January 2018 till December 2018) Quit rent and assessment Extension of kitchen 600 8,600 250 2,500 RM 12,000 Nil 21,000 Rental: Bungalow January 2018 to April 2018 (RM3,000 per month) May to June 2018 (vacant) July 2018 to December 2018 (RM3,500 per month) Expenses Interest on loan (January 2018 till December 2018) Quit rent and assessment Fire insurance premium 12,400 1,600 1,780 842 BRIL Expenses Interest on loan (January 2018 till December 2018) Quit rent and assessment Fire insurance premium Replacement of furniture (sofa) 12,400 1,600 1,780 480 RM Nil Rental: Factory Vacant for the last 3 years Expenses Advertisement cost Interest on loan (January 2018 to December 2018) Quit rent 600 12,400 1,600 Required: (a) With reference to the ITA, compute the adjusted rental income that will be brought to tax for the year of assessment 2018. (13 marks) (b) With reference to the ITA, briefly discuss the deductibility of the expenses incurred on renovation, repair maintenance and replacement of furniture in the letting of the properties. (6 marks) In respect of expenses of a revenue nature that are incurred by an individual owner of a rented property assessed under the provisions of Section 4(d), discuss briefly the deductibility of these expenses in arriving at the adjusted income when the properties are not generating any rental income under the following situations: (0) Pre-commencement (ii) Short term or temporary period of no income (1 mark) (4 marks) (iii) Long period of not generating income (1 mark) (d) JM Sdn Bhd (landlord), a Malaysian resident company carrying on the business of grain distributors, owns one office lot within a large office building in Kuala Lumpur. In May 2018, the landlord entered into a tenancy agreement with Joey & Co (tenant) a legal firm, for a period of two years at a monthly rental of RM3,000. However, the tenancy agreement prescribed that the full rental for two years of RM72,000 be settled in one lump sum at the time when the tenancy agreement was signed i.e. May 2018. The landlord does not provide any ancillary services to the tenant in relation to the rented property Required: How would the sum of RM72,000 be treated by the recipient, JM Sdn Bhd? Clearly explain your answer, and cite the relevant section of the ITA or the relevant Public Ruling as applicable. 15 markal Question 4 [30 marks) (54 minutes) Encik Tajuddin owned the following three (3) properties. He provides active and comprehensive maintenance and support services to the properties. The rental status of these properties for the year ended 31 December 2018 are as follows:- RM 7,200 900 Rental: Apartment (1st time rental) January 2018 to December 2018 (RM600 per month) Rental Deposit -refundable Expenses Commission to real estate agent for finding new tenant Interest on loan (January 2018 till December 2018) Quit rent and assessment Extension of kitchen 600 8,600 250 2,500 RM 12,000 Nil 21,000 Rental: Bungalow January 2018 to April 2018 (RM3,000 per month) May to June 2018 (vacant) July 2018 to December 2018 (RM3,500 per month) Expenses Interest on loan (January 2018 till December 2018) Quit rent and assessment Fire insurance premium 12,400 1,600 1,780 842 BRIL Expenses Interest on loan (January 2018 till December 2018) Quit rent and assessment Fire insurance premium Replacement of furniture (sofa) 12,400 1,600 1,780 480 RM Nil Rental: Factory Vacant for the last 3 years Expenses Advertisement cost Interest on loan (January 2018 to December 2018) Quit rent 600 12,400 1,600 Required: (a) With reference to the ITA, compute the adjusted rental income that will be brought to tax for the year of assessment 2018. (13 marks) (b) With reference to the ITA, briefly discuss the deductibility of the expenses incurred on renovation, repair maintenance and replacement of furniture in the letting of the properties. (6 marks) In respect of expenses of a revenue nature that are incurred by an individual owner of a rented property assessed under the provisions of Section 4(d), discuss briefly the deductibility of these expenses in arriving at the adjusted income when the properties are not generating any rental income under the following situations: (0) Pre-commencement (ii) Short term or temporary period of no income (1 mark) (4 marks) (iii) Long period of not generating income (1 mark) (d) JM Sdn Bhd (landlord), a Malaysian resident company carrying on the business of grain distributors, owns one office lot within a large office building in Kuala Lumpur. In May 2018, the landlord entered into a tenancy agreement with Joey & Co (tenant) a legal firm, for a period of two years at a monthly rental of RM3,000. However, the tenancy agreement prescribed that the full rental for two years of RM72,000 be settled in one lump sum at the time when the tenancy agreement was signed i.e. May 2018. The landlord does not provide any ancillary services to the tenant in relation to the rented property Required: How would the sum of RM72,000 be treated by the recipient, JM Sdn Bhd? Clearly explain your answer, and cite the relevant section of the ITA or the relevant Public Ruling as applicable. 15 markal