You are employed in the Tax Department of Depity Accounting and Tax Consultants. Your supervisor has assigned you the task of computing and reporting on the tax implications of the proposals from one of the company's major clients, Mapleton Plc. Mapleton Plc is a diversified company with subsidiaries in different sectors of the economy including transport and logistics, manufacturing. The board of directors of the company is in the process of restructuring the company and considering divesting in one of the companys subsidiaries, Moonlight Limited.

Moonlight Limited has an issued share capital of 600 000, P1.00 ordinary shares.The company was formed by Kalunga Muyenge as the sole shareholders.He later sold 70% of his shares to Mapleton Plc at P5.00 each five years ago. The company has not been performing to the expected level since its acquisition, hence the decision to divest from it. There are currently two proposals being considered both from Starlink Limited. Kalinga Muyenge has also agreed to the decision to sell Moonlight Limited to Starlink Limited.

PROPOSAL 1

This proposal involves the sale of the whole share capital of Moonlight Limited to Starlink Limited at a price of P6.45 per share. Starlink Limited would assume all the liabilities of Moonlight Limited..Moonlight's assets and liabilities are given in Exhibit 1 below.

PROPOSAL 2

Starlink Limited will acquire individual assets of Moonlight Limited at the agreed realization amounts as shown in Exhibit 1. The liabilities are to be settled by Moonlight Limited.

Exhibit 1

Moonlight Limited's assets and liabilities on 30 June 2022 are given below:

	Cost	TWDV	Realisable Value
Freehold building	1,750,000	1,270,000	2,100,000
Plant & Machinery	580 000	58 000	216 000
Furniture & Fittings	130,000	52,000	64 000
Commercial vehicles	780 000	488 000	520,000
Passenger motor vehicle	525,000	262,500	300,000
Inventory	140 000	0.00	135 000
LIABILITIES Bank loan Bank overdraft Trade & other Receivables	450 000 180,000 270,000

NOTES

1. The bank loan is secured byva Fixed charge over the administration block

2. The bank overdraft I'd secured by a floating charge over the assets

3. The freehold building cost of P1,750 000 consists of land bought January 2016 for P550,000 and industrial building that was constructed forvP1 200,000 and came into use at the end of aMay 2016. Capital allowances granted on the building were P210 000.

REQUIRED

Prepare briefing notes for your supervisor in which you explain the tax implications for each of thectwo proposals. Your answer should include;

a) Explanation and calculations of the Income tax and capital gains for Moonlight Limited Mapleton Plc and for Kalungu Mayenge of the disposal of Moonlight Limited on 30 August 2022 (25marks,)

b) Calculation of the cas Receivable by both Mapleton Plc and Kalungu Muyenge after the disposal under each proposal. Advise on which proposal you would recommend giving your reasons. (15marks)