Danny Dan (40 years) operated a satellite installation business as a sole proprietor. On 1 April...

 

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Danny Dan (40 years) operated a satellite installation business as a sole proprietor. On 1 April in the current year of assessment, he decided to enter into a partnership agreement with Jason John (28 years). They agreed to share profits on a 50:50 ratio. The following income and expense items for the current year of assessment relate to the partnership: Income Gross income Irrecoverable debts recovered (Note 1) Expenses Sundry expenses (deductible for tax purposes) Administrative expenses Depreciation (Note 2) Salaries: Danny Jason Other employees Retirement annuity fund: Danny (Note 3) Jason (Note 3) Provident fund: Other employees (Note 4) Drawings Danny Bad debts (Note 5) Profit on sale of office building (Note 6) Additional Information: 930 000 915 000 15 000 986 550 192 450 56 000 74 300 225 000 180 000 78 000 26 300 15 000 19 300 14 200 6000 100 000 a) Irrecoverable debts recovered The irrecoverable debts recovered relates to R15 000 for debtors brought into the partnership by Jason. b) Depreciation Delivery vehicle 1: This vehicle was purchased new by Jason John on 30 May 2016 for R150000. Delivery vehicle 2: This vehicle was purchased second hand in cash by the partnership on 1 April of the current year of assessment (2022), when Jason joined, at a cost of R200 000. In terms of Interpretation Note No. 47, delivery vehicles are written off over a four-year period. The second-hand delivery vehicle was purchased from a person who is registered for VAT purposes. c) Contributions to retirement annuity funds The retirement annuity fund contributions are allowed as a deduction for the partner-ship since they are paid in terms of the partnership agreement. d) Contributions to provident fund The partnership contributes R19 300 on behalf of its employees to a provident fund. e) Bad debts R2 000 of the bad debts relates to a debtor brought into the partnership by Jason. f) Profit on the sale of an office building On 1 April of the current year of assessment Danny bought a new office building at a cost of R2 500 000. Due to economic pressures Danny sold the building and made a capital gain of R100 000. The section 13 allowance on the building is calculated at 5% for the year. g) General All amounts exclude VAT, except where otherwise indicated. The partnership is a registered vendor for VAT purposes. REQUIRED: Calculate the taxable income for Danny Dan for the year of assessment ending February 2022. Danny Dan (40 years) operated a satellite installation business as a sole proprietor. On 1 April in the current year of assessment, he decided to enter into a partnership agreement with Jason John (28 years). They agreed to share profits on a 50:50 ratio. The following income and expense items for the current year of assessment relate to the partnership: Income Gross income Irrecoverable debts recovered (Note 1) Expenses Sundry expenses (deductible for tax purposes) Administrative expenses Depreciation (Note 2) Salaries: Danny Jason Other employees Retirement annuity fund: Danny (Note 3) Jason (Note 3) Provident fund: Other employees (Note 4) Drawings Danny Bad debts (Note 5) Profit on sale of office building (Note 6) Additional Information: 930 000 915 000 15 000 986 550 192 450 56 000 74 300 225 000 180 000 78 000 26 300 15 000 19 300 14 200 6000 100 000 a) Irrecoverable debts recovered The irrecoverable debts recovered relates to R15 000 for debtors brought into the partnership by Jason. b) Depreciation Delivery vehicle 1: This vehicle was purchased new by Jason John on 30 May 2016 for R150000. Delivery vehicle 2: This vehicle was purchased second hand in cash by the partnership on 1 April of the current year of assessment (2022), when Jason joined, at a cost of R200 000. In terms of Interpretation Note No. 47, delivery vehicles are written off over a four-year period. The second-hand delivery vehicle was purchased from a person who is registered for VAT purposes. c) Contributions to retirement annuity funds The retirement annuity fund contributions are allowed as a deduction for the partner-ship since they are paid in terms of the partnership agreement. d) Contributions to provident fund The partnership contributes R19 300 on behalf of its employees to a provident fund. e) Bad debts R2 000 of the bad debts relates to a debtor brought into the partnership by Jason. f) Profit on the sale of an office building On 1 April of the current year of assessment Danny bought a new office building at a cost of R2 500 000. Due to economic pressures Danny sold the building and made a capital gain of R100 000. The section 13 allowance on the building is calculated at 5% for the year. g) General All amounts exclude VAT, except where otherwise indicated. The partnership is a registered vendor for VAT purposes. REQUIRED: Calculate the taxable income for Danny Dan for the year of assessment ending February 2022.

Answer rating: 100% (QA)

Danny Dans taxable income for the year of assessment ending February 2022 can be calculated as follows Income Gross Income 915 000 Irrecoverable Debts ... View the full answer