Gross Income Summary-1 chapter 2 PDF

Preview

Summary

GROSS INCOME5. Capital Receipts: Capital vs revenue is relevant, as capitl gains are taxed @ lower rate than income. Inclusion Rate: 1. Co. = 80% 2. Individuals = 40% ONUS: Onus rests with TP to prove nature of receipt **(s102 of TAA) Nature of Asset:** Visser (Tree vs Fruit): Income is what capital...

Description

1. An amount, in cash or otherwise: - Lategan: Amt must be given a wider def. Amt must be ascertainable; must not only include money but also the value of assets. - Butcher Bros: Amt refers to determinable value. Onus rests with Commissioner to determine value. - Brummeria: As long as an amt is ascertainable it can be incl. in GI. Amt can be in the form of an asset, that if sold results in money. Notional amts ≠ an amt to be include in GI (notional = what could’ve been earned) 2. Received by/Accrued to: Received by: -Geldenhuys: Amt only in GI if it is: 1. Received by him 2. On his behalf 3. For his benefit - MP Finance: The legality (illegality) of a receipt doesn’t preclude it from tax treatment. - Bi-lateral receipt: used for your own intention therefore received by you for your own benefit. - Uni-lateral receipt: (taking money) doesn’t mean it has been received by you as it was never given to you. - Delagoa Bay Cigarette: The legality of income is irrelevant. Amt = Gross Income. -Pyott: Deposits are revenue in nature therefore included in GI. Deposits arise from income-earning trade. Accrued to: -Witwaterstrand Association Racing Clubs: Once has accrued to TP; subsequent disposal is irrelevant. - if amt accrues to TP and no obligation to pay over = still accrues to TP. - People Stores: Accrued to = entitled to. Taxed on earlier of receipt or pmt. -Lategan: Accrued to = entitled to. -Mooi: (Strongest case): Unconditionally entitled to an amount = accrued to. Amts linked to a suspensive condition ≠ GI - Delfos: An amt is included in GI @ earlier of receipt or accrual.

DAMAGES & COMPENSATION: -Fourie Beleggings: Compensation for damages of capital asset = Capital. Compensation for loss of income = Revenue. -Stellenbosch Farmer’s Winery: Compensation for cancellation of contract to an income earning right will be capital in nature

DEFINITION: 1. An amount, in cash or otherwise. 2. Received by or accrued to 3. By such a person (resident/non-resident) 4. During the year of assessment (defined) 5. Excluding receipts of a capital nature.

GROSS INCOME

3. BY SUCH A PERSON (RESIDENT/NON-RESIDENT): -Resident (must be intention). Cease to be a resident when said person emigrates or dies - Cohen: Being absent for a year does not preclude you from being a resident. Ordinarily resident: A country he returns to from his wanderings therefore his real home. - Kuttle: Person must be habitually and normally a resident there. Temp. absences does not make you a resident. Must take necessary steps to become a resident. PHYSICAL PRESENCE TEST: 1. >91 days in CYOA. 2. >91 days in prev. 4 yrs (excl. CYOA) 3. >915 days in prev. 4 yrs. (4 yrs added together = 915 days or more) NB: Not a resident if absent for continuous period of = >330 days.

5. Capital Receipts: - Capital vs revenue is relevant, as capitl gains are taxed @ lower rate than income. - Inclusion Rate: 1. Co. = 80% 2. Individuals = 40% - ONUS: Onus rests with TP to prove nature of receipt (s102 of TAA) 1. Nature of Asset: -Visser (Tree vs Fruit): Income is what capital produces. The tree = capital (longlasting). Fruit can be sold therefore revenue in nature. -George Forest Timber: Assets are either classified as fixed or floating capital. Fixed Capital = Intention to keep. Floating Capital = Acquired for sale/disposal. -Nel (Kruggerands): An asset can be sold to realise a capital asset. Profit made from that realisation ≠ revenue as another capital asset was acquired therefore intention hasn’t changed. Consider intention of a Natural Person: - Objective factors to consider (ipse dixit): 1. Conduct of a TP leading up to sale transaction. 2. Reason for sale transaction. 3. Frequency of transactions. (if not frequent = capital). 4. Continuity of activities. 5. Period asset was held. APPLY 6. Manner in which transaction was financed. 7. Nature of TP occupation or business. 8. Carrying on a business to make a profit. 9. Documentary evidence. - Intention of Companies: 1. Name of company. 2. Objectives stated in MOI. 3. Occupation and general activities of s/holders/directors. APPLY 4. Circumstances and events preceding incorporation of Co. 5. Formal Proceedings in minutes. 6. Change in s/holders. -Intention is deduced from those determining the direction of the company: therefore 1. Directors. 2. S/holders & 3. Persons who effectively control the company -Richmond Estates: Intention of company is through its directors. -Levy: One needs to determine the dominant intention; if it can’t be determined = revenue Scheme of Profit-Making: - Pick n Pay Employee Share Purchase Trust: 1. If amt is otherwise than making a profit = Capital in nature. 2. If in scheme of profit making = proceeds = revenue= GI Mixed/Dual Intention: -Stott: Asset may be realised to its best advantage. Asset sold at a profit ≠ change in intention. - Nel (Kruggerands): An asset can be sold to realise a capital asset. Profit made from that realisation ≠ revenue as another capital asset was acquired therefore intention hasn’t changed. Change in intention: -John Bell: Something more is required to change character of asset to render its proceeds as GI. -Natal Estates (Ltd): Intention changed therefore crossed the rubicon. Rubicon = decisive, irrevocable steps. -Nussbaum: Secondary purpose could taint primary purpose of TP therefore consider frequency. (Consider investors)...