Ts. Teoh works as an IT specialist with a multinational company in Kuala Lumpur. His wife, Mrs. Karen is a retired government servant. She run a small business with her old friend, Ms. Yasmin. The couple has three children and all of them are Malaysian residents for the purpose of the Income Tax Act 1967 (as amended).

Ts. Teoh’s income and benefits from his employment for the year ended 31 December 2020 are as follows:

Ts. Teoh

(i) Gross salary of RM 12,000 per month.

(ii) A 2-month bonus received on 30 December 2020.

All the salary and bonus received are subject to Employees’ Provident Fund (EPF) contribution. The employer contributes 11% and the employee contributes 9% to the EPF. The salary is also deducted with Socso of RM15 per month.

(iii) A travelling allowance for official duties of RM500 per month.

(iv) Ts. Teoh took a week annual leave. He and his wife went to Kundasang, Sabah. The flight ticket and cost of accommodation of RM1,500 of the leave passage were paid by the company.

(v) He also took oversea leave passage, Jogjakarta Indonesia of RM735. This refers to cost of ticket only and it was paid by the company.

(vi) An immediate family medical and dental benefits of RM5,000 covered by the company.

(vi) Ts. Teoh had a month business trip to Sabah and Sarawak. The company had provided him with hotel accommodation throughout the entire month. The room costed RM150 per night.

(ix) A car costing RM100,276 when new and for which the fuel cost was borne by him. The car is used 70% for official and 30% for personal/non-official use.

During the year, Ts. Teoh had incurred the following expenditures:

(i) A donation of hamper worth RM1,000 and cash RM2,000 to an approved institution. (ii)  Medical expenses for his in-law’s medical treatment of RM1,800.

(iii) Books and magazines of RM1,400.

(iv) Personal computer and sport equipment of RM1,200 and RM450 respectively.

The couple has three children. The first child, aged 20 years old is currently in the first year of a degree program in a local university. The second and the third child, aged 15 and 13 years old are at secondary school.

                                                                                                                                                                                                                                                                                                                                     

During the year, Ts. Teoh received rental income of RM15,000 and single tier dividends from several companies listed in Bursa Malaysia of RM3,750.

Mrs. Karen

Mrs. Karen and her good friend, Ms. Yasmin have been carrying on a partnership business since 1 January 2016 and the accounts are prepared to 31 December each year. The partnership agreement provides the following:

(i)   Interest on capital of 10% per annum for each partner.

(ii) Capital contribution of RM40,000 (Karen) and RM60,000 (Yasmin).

(iii) Salary of RM2,000 per month for each partner.

(iv) Profit sharing ratio of 2/5 (Karen) and 3/5 (Yasmin)

On 30 June 2020, Yasmin migrated to Canada. She left the partnership and withdraw his capital and profit up to the date.

New partner, Hana joins the partnership. The new agreement is as follows:

(i)    Interest on capital of 10% per annum for each partner

(ii)   Capital contribution of RM50,000 (Karen) and RM50,000 (Hana).

(iii) Salary of RM2,000 per month for each partner.

(iv) Profit sharing ratio of 1/2 (Karen) and 1/2 (Hana).

The partnership’s trading, profit and loss account for the year ended 31 December 2020 shown net profit of RM78,000. The profit has been deducted with partners’ salaries and partners’ interest on capital for the year. It has also been deducted with depreciation of RM26,000, legal fees to amend the agreement of RM1,000 and cash donation on 24 December 2020 to approved institution of RM2,000.

Capital allowance for the YA 2020 is RM22,000.

During the year, Mrs. Karen incurred the following expenditures:

(i)    Sport equipment and sport attire of RM300 and RM438 respectively.

            (ii)   Medical and education insurance with Hong Leong Insurance for her family totaling

                    RM2,500.

(iii) Medical expenses for both of her parent for RM2,000. Mrs. Karen takes very good

                    care of her parents whose house is just few blocks from her house.

(iii) Full set of supplement and skincare treatment for the family of RM1,900.

                                                                                                                                                                                                                                                                   

Required:

For the year of assessment 2020, assuming Ts. Teoh and Mrs. Karen opt for separate assessment, and Ts. Teoh claims the children relief, compute the tax payable for:

(i) Ts. Teoh and

(ii) Mrs. Karen.

Note: You should indicate by the use of the word ‘nil’ where appropriate, any item referred to in the question for which no adjusting entry needs to be made in the tax computation.

(40 marks)