Siya Zulu Siya Zulu has been achieving a reasonable return from the letting of a block of 15 flats that he purchased in 1986. He does not have a history of property dealing. Siya Zulu is aware that he can make a substantial profit by selling the flats individually. He has made application for a sectional-title register to be opened. To make the flats more attractive to would-be purchasers he is considering improving them. Required Discuss, giving reasons, whether the proceeds from the sale of the flats are of a revenue nature.

Discuss the position when the flats are sold individually without improvements being made, and the position when they are first improved, and then sold.

John Wallis John Wallis who is ordinarily resident in Durban purchased a flat in Cape Town. It is occupied rent free by his minor daughter who is a full-time student at a university in Cape Town. During the university vacations his minor daughter returns home (to Durban).She then lets the flat to her two friends who reside in Cape Town. For the 2017 year of assessment she earned R10 000 from the letting of this flat.

Required Discuss whether these rentals of R10 000 should be included in gross income and, if so, then state in whose gross income.

Bronze Limited Bronze Limited is not a resident of South Africa. It owns two rent-producing properties, one situated in South Africa and one situated outside South Africa. It earned net rentals from the property situated in South Africa in its 2017 year of assessment (ended on 28 February 2017) of R200 000. It earned net rentals from the property situated outside South Africa in its 2017 year of assessment the equivalent of R270 000. The net rentals as determined above are after the deduction of deductible directors fees paid to the directors for the running of Bronze Limited. Of these directors fees, R20 000 was paid to Kate Middle who is a resident of the republic. Kate Middle attends to Bronze Limiteds South African transactions.

Required Discuss what the South African normal tax consequences to both Bronze Limited and Kate Middle are of the above amounts that they earned.