Copy of CORPORATE COMBINATION 2

Carol and Sandra are confused on how their Advisor has calculated the retirement

contributions that they should contribute towards their retirement in this year of assessment. They each earned an amount of R500 000 and each contributed R150 000 towards their RA in this year of assessment yet, SARS allowed Carol a greater deduction than they allowed for Sandra.

The information they provided you is as follows:

CAROL	SANDRA
Taxable income: R500,000	Taxable income: R500,000
Includes a taxable gain of R100 000	Includes a taxable gain of R400 000

Choose the correct option

Carol should be allowed a deduction of R137 500 and Sandra a deduction of R100 000 should be allowed.
Both Carol and Sandra should each be allowed a deduction of R137 500
Both Carol and Sandra should each be allowed a deduction o R150 000
No correct answer

Contributions that have been previously disallowed over the years to a pension fund will, at retirement be used to reduce a taxable lump sum and, any unused contributions at this stage can be used to exempt annuities as per S10C of the Income Tax Act. Is this a correct statement?

This is a correct statement
This is an incorrect statement

Which of the following receipts form part of remuneration? Select the correct combination below: (only a few are listed)

Salary, living annuity, fringe benefits, rental income, restraint of trade
Commission, salary, 100% of travel allowance, value of assets acquired by the employer which is greater than market value
Value of accommodation, 80% cash equivalent of company car, Salary and restraint of trade
No correct combination

Jen is not impressed as her advisor implemented a retirement annuity last year which fell within the current tax year with the intention, that she would be able to deduct the full amount from from her taxable income. Her final year of assessment reflected that she exceeded the capped amount by R350 000. She has subsequently been told that she will not be able to ever claim this amount.

Select the correct statement

Jen will be able to carry this amount over to the next year of assessment which will be deemed to be contributions made in the same year of assessment
Jen will be able to use these disallowed contributions when she resigns or retires against lump sums received
These contributions will be carried over to the next year of assessment and an amount of R1800 can be deducted every year until there is a nil balance

ABC owns a life insurance policy on the life of an employee Bob. This is a risk only policy. When Bob resigned he asked for a cession of the policy over to him as the owner. This policy will remain exempt from capital gain tax due to the fact that this is a risk only policy. Is this statement true or false.

This is a true statement
This is a false statement

Alan and Ben are in partnership together and entered into a buy and sell agreement funded with life insurance policies. They terminated the partnership 5 years ago.At this time, they decided to cede the insurance policies to one another. The owner is now also the life assured. 2 years late Ben joins another partnership with Zack and they enter intoa buy and sell agreement. Ben agrees to cede his original policy to Zack for the purpose of the buy and sell arrangement.

Zack is now the owner of the policy on the life of Ben.

Alan subsequently dies and the policy proceeds are paid to his wife.

Select the correct statement.

It is a roll over to the spouse and therefor not capital gain tax
No capital gain tax as it is paid to the spouse of the original beneficial owner
There is no capital gain tax as this is a risk only policy
There is no correct answer

Alan and Ben are in partnership together and entered into a buy and sell agreement funded with life insurance policies. They terminated the partnership 5 years ago.At this time, they decided to cede the insurance policies to one another. The owner is now also the life assured. 2 years late Ben joins another partnership with Zack and they enter intoa buy and sell agreement. Ben agrees to cede his original policy to Zack for the purpose of the buy and sell arrangement.

Zack is now the owner of the policy on the life of Ben.

Should Ben die today and the policy proceeds paid to Zack:

Select the correct statement

The policy is deemed to be a second hand policy and Zack will be responsible for any capital gain tax
The policy is deemed to be a second hand policy and Zack will be responsible for any capital gain tax
Because at the time of death the partnership still exists, there will be no capital gain or loss tax

Choose the incorrect statement with regards to the Pension Fund Act

A spouse married as per the Marriage Act is recognised as a person whom the member is liable for maintenance.
Persons who are engaged could potentially claim as someone who could have become dependant had the member not died.
Persons who are engaged could potentially claim as someone who could have become dependent had the member not died.
A partner in a opposite sex long term relationship is recognised as a person whom the member is not legally liable for maintenance but de facto dependant.

Ian received a restraint of trade payment of R 350 000 ensuring that he not trade within 50km radius of his previous employer for a period of 5 years. Within 3
months of leaving his employer, he opened his business just slightly in the 50kmradius. The previous employer opted for Ian to refund the proceeds instead of taking
Ian to court. Ian obliged and refunded R350 000 to his previous employer.

Ian will not be able to deduct R350 000 from his taxable income
Ian will be able to deduct R350 000 from his taxable income
Ian will only be able to deduct R350 000 but over a period of 5 years
None of the above

Joseph worked for BBD Pty Ltd, a local company, for a period of 15 years. 9 of these years was in France when his local employer transferred him to work in their
subsidiary company in France. Joseph and his employer contributed towards the employer pension fund in SA. Joseph, while in France, invested money into a equivalent pension in France as he believed that on retirement he would live in France and not return to SA. The following proceeds were paid to Joseph as a result of the services rendered to the BBD Pty Ltd employer:
Employer Pension fund:   R1 200 000 – Joseph will be drawing R600 000
Pension Fund in France: R600 000 – Joseph drew the whole lot.

Please advise Joseph the total exempt amount he may be granted.

There will be no amount exempt
R600 000 will be exempt
R360 000 will be exempt
R1 200 000 will be exempt

Zanele sells scented candles and bath salts. She is very successful. She sold R320 000 worth of goods candles on 16 February 2024 but was only going to get paid on the 11th March 2024 when delivery takes place. She received an order for 20kgs of bath salts on the 3rd March 2024 and will only get paid on the 27th March 2024. This order amounts to R150 000. In the 2024/2025 year of assessment, Zanela must declare an amount of R470 000 to the receiver of revenue.

The amount she wishes to declare is incorrect
The amount she is declaring is correct

Geoff, who has been employed for 3 years, resigned from his employment as he would like to set up a new venture selling bubble bath. He will be setting up the business across the road from his current employer who is in the perfume industry. Part of his resignation package was an amount paid by the employer asking Geoff to try not steal his (employer’s) clients. The amount paid to Geoff was R150 000.
Select the correct option

This is a restraint of trade included in gross income
This is a severance package which will attract lump sum tax
This is purely a payment from the employer included in gross income
It could be any of the above
It is none of the above

Copy of CORPORATE COMBINATION 2

Copy of CORPORATE COMBINATION 2

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