Johnny and Jenny, a married couple who had the following income and expenditure for the year ended 31 March 2021:

Johnny

Johnny has been employed by a company in Hong Kong for years. For the year ended 31 March 2021, Johnny's employment income amounted to HK$360,000, out of which MPF contributions of HK$18,00 was deducted. Johnny also made donations of HK$20,000 to certain approved charities under his own name.

Johnny has also been running a sole-proprietor business since 2015. The business had assessable profits of HK$150,000 for the year ended 31 March 2021. According to the tax records, the business had an unutilized adjusted loss of HK$50,000, carrying forward to the year of assessment 2020/21.

Johnny holds property for lease, which was acquired under mortgage for years. At the year-end of 31 March 2021, the net assessable value of the leased property amounted to HK$330,000. Mortgage loan interest paid in respect of the leased property amounted to HK$180,000.

Jenny

Jenny’s employment income for the year ended 31 March 2021 was HK$180,000, out of which MPF contributions of HK$9,000 was deducted. Jenny also made donations of HK$80,000 to certain approved charities under her own name.

Jenny operates a partnership business with her friends in trading communication devices. For the year ended 31 March 2021, Jenny shared the partnership's loss of HK$230,000.

Johnny and Jenny jointly elected to be assessed under personal assessment in the year of assessment 2020/21. Except for married persons’ allowance, Johnny and Jenny were not entitled to other personal allowances in the year.

Required:

1. a) Compute the tax payable by Johnny and Jenny under personal assessment for the year of assessment 2020/21, ignoring tax rebate. 

2. b) Explain to the couple how they could make use of Jenny’s share of the partnership’s loss in order to minimize their overall tax exposures. 

Answer rating: 100% (QA)

An s a The tax payable by Johnny and Jenny under personal assessment for the year of assessment 2... View the full answer