Queenie Zodwa is a 25-year old Venda woman originally from the Vhembe district in Limpopo, South...

  

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Queenie Zodwa is a 25-year old Venda woman originally from the Vhembe district in Limpopo, South Africa. Queenie moved to Pretoria when she was 20 years old to study Bcom Entrepreneurship at the University of Pretoria. Queenie's mother is a retired agricultural worker who is dependent on social grants. During April 2022, Queenie graduated from the University of Pretoria. Since her first year, Queenie was a NFSAS student. In her first year, Queenie learned about the importance of savings and the detrimental effect of consumerism among young South Africans. Taking to heart what she has learned, Queenie never bought food on campus but packed a healthy lunch box. Furthermore, Queenie never partied, nor spent her money on clothes and gadgets. Instead, Queenie saved as much as possible. In her third year, Queenie worked as a tutor for the University of Pretoria. She invested her salary in an interestbearing account. During May 2022, Queenie attended a Home-Makers Fair at Menlyn Mall where she got inspired to start her own business to make affordable Jam-Jar candles to compete against the very expensive equivalent Jam-Jar candles imported from the United States of America. Queenie withdrew all her savings and commenced with business on 1 August 2022. Soon after commencing with business, Queenie entered a long-term supply agreement with Linen Avenue, a famous retail home décor outlet. In terms of the agreement, Queenie must deliver 200 000 units of Jam-Jar candles per month. Queenie supplies the Jam-Jar candles, and Linen Avenue puts their own logos and designs on the jars. On the bottom of the jars the following words appear- "Specially manufactured for Linen Avenue by Queenie Candles, South Africa" Based on the success of her business, the elders from the Vhembe district reminded Queenie of her responsibilities towards the community. As a result, Queenie deposits an amount of R20 000 in her mother's account every month as 'black tax'. On 1 September 2022, the trademark holder for the expensive Jam Jar candles imported from the United States of America instituted legal action against Linen Avenue and Queenie Candles for trademark infringement. Queenie's lawyers negotiated with the trademark holder that Queenie simply manufactured the candles in generic jam jars and that Queenie is in no way involved in the product signage, design, slogans, name, or marketing whatsoever. The trademark holder subsequently withdrew its case against Queenie. After reaching a settlement with the trademark holder, Linen Avenue informed Queenie that they are, in terms of the settlement, prohibited from selling candles in jam jars. However, they still want to sell Queenie's candles, just in a different container. Queenie employed twenty additional staff to remove the candle wax from the jam jars and to put it in different glass containers. Unfortunately, because of the paraffin content in the candles, it could not be melted and removed from the jam jars. Each jam jar had to be broken, and the candle removed by hand. As a result, Queenie could not return the jam jars for a refund or reuse it for something else. However, a recycling depot agreed to buy the broken glass from her. While putting the broken glass in a skip to take to the recycling depot, Queenie did not pay attention and she cut her hand. The glass damaged a major artery. As a result of load shedding, there was no mobile signal. The mobile network tower batteries were stolen the night before. Despite all their efforts, her staff could not stop the bleeding or get help. Queenie passed away on 15 November 2022. WHAT IS REQUIRED OF YOU? a) Shortly before her death, Queenie requested you for written advice on whether or not she may deduct the monthly payments to her mother from her gross income. b) In her will, Queenie has appointed you as the executor for the estate and her mother as the only person to inherit. Explain how, for tax purposes, you will treat the following transaction- On 1 November 2022, Queenie entered a rental agreement with Bottle-It for a bottle manufacturing machine so that she can manufacture her own unique candle jars. In terms of the agreement, Queenie must pay an 'exclusivity fee of R100 000 for the machine to be set-up to manufacture the jars in Queenie's unique design. As Bottle-It already set-up the machine and delivered it at Queenie's warehouse, you were unable to cancel the agreement without incurring additional penalties. You paid the R100 000 on 11 December 2022. Queenie Zodwa is a 25-year old Venda woman originally from the Vhembe district in Limpopo, South Africa. Queenie moved to Pretoria when she was 20 years old to study Bcom Entrepreneurship at the University of Pretoria. Queenie's mother is a retired agricultural worker who is dependent on social grants. During April 2022, Queenie graduated from the University of Pretoria. Since her first year, Queenie was a NFSAS student. In her first year, Queenie learned about the importance of savings and the detrimental effect of consumerism among young South Africans. Taking to heart what she has learned, Queenie never bought food on campus but packed a healthy lunch box. Furthermore, Queenie never partied, nor spent her money on clothes and gadgets. Instead, Queenie saved as much as possible. In her third year, Queenie worked as a tutor for the University of Pretoria. She invested her salary in an interestbearing account. During May 2022, Queenie attended a Home-Makers Fair at Menlyn Mall where she got inspired to start her own business to make affordable Jam-Jar candles to compete against the very expensive equivalent Jam-Jar candles imported from the United States of America. Queenie withdrew all her savings and commenced with business on 1 August 2022. Soon after commencing with business, Queenie entered a long-term supply agreement with Linen Avenue, a famous retail home décor outlet. In terms of the agreement, Queenie must deliver 200 000 units of Jam-Jar candles per month. Queenie supplies the Jam-Jar candles, and Linen Avenue puts their own logos and designs on the jars. On the bottom of the jars the following words appear- "Specially manufactured for Linen Avenue by Queenie Candles, South Africa" Based on the success of her business, the elders from the Vhembe district reminded Queenie of her responsibilities towards the community. As a result, Queenie deposits an amount of R20 000 in her mother's account every month as 'black tax'. On 1 September 2022, the trademark holder for the expensive Jam Jar candles imported from the United States of America instituted legal action against Linen Avenue and Queenie Candles for trademark infringement. Queenie's lawyers negotiated with the trademark holder that Queenie simply manufactured the candles in generic jam jars and that Queenie is in no way involved in the product signage, design, slogans, name, or marketing whatsoever. The trademark holder subsequently withdrew its case against Queenie. After reaching a settlement with the trademark holder, Linen Avenue informed Queenie that they are, in terms of the settlement, prohibited from selling candles in jam jars. However, they still want to sell Queenie's candles, just in a different container. Queenie employed twenty additional staff to remove the candle wax from the jam jars and to put it in different glass containers. Unfortunately, because of the paraffin content in the candles, it could not be melted and removed from the jam jars. Each jam jar had to be broken, and the candle removed by hand. As a result, Queenie could not return the jam jars for a refund or reuse it for something else. However, a recycling depot agreed to buy the broken glass from her. While putting the broken glass in a skip to take to the recycling depot, Queenie did not pay attention and she cut her hand. The glass damaged a major artery. As a result of load shedding, there was no mobile signal. The mobile network tower batteries were stolen the night before. Despite all their efforts, her staff could not stop the bleeding or get help. Queenie passed away on 15 November 2022. WHAT IS REQUIRED OF YOU? a) Shortly before her death, Queenie requested you for written advice on whether or not she may deduct the monthly payments to her mother from her gross income. b) In her will, Queenie has appointed you as the executor for the estate and her mother as the only person to inherit. Explain how, for tax purposes, you will treat the following transaction- On 1 November 2022, Queenie entered a rental agreement with Bottle-It for a bottle manufacturing machine so that she can manufacture her own unique candle jars. In terms of the agreement, Queenie must pay an 'exclusivity fee of R100 000 for the machine to be set-up to manufacture the jars in Queenie's unique design. As Bottle-It already set-up the machine and delivered it at Queenie's warehouse, you were unable to cancel the agreement without incurring additional penalties. You paid the R100 000 on 11 December 2022.

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a Deductibility of Monthly Payments to Queenies Mother Before her death Queenie requested advice on whether she could deduct the monthly payments of R... View the full answer