Mr Wong established a partnership with his friend, Lewis, in Hong Kong. For the year of...

 

 

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Mr Wong established a partnership with his friend, Lewis, in Hong Kong. For the year of assessment 2020/21, the partnership incurred a tax loss of $160,000, and the loss is attributable to Mr Wong and Lewis on a 50-50 basis. Mr Wong has no tax loss bought forward from last year under this partnership. Mr Wong also established a sole proprietorship book shop in Hong Kong. Mr Wong donated $60,000 (under the name of the book shop) to World Vision (an approved charity) and the sole proprietorship earned a profit of $40,000 after deducting the donation for the year of assessment 2020/21. On 10 April 2021, Mr Wong received $80,000 as a director's fee from Herme Ltd, a Hong Kong incorporated company established by Johnny, a friend of Mr Wong. Johnny told Mr Wong that the director's fee was approved on 10 March 2021 during the board of directors" meeting held in Hong Kong. Mr Wong has been the director of Herme Ltd since 2018, but he has not attended any board meetings of Herme. Mr Wong acquired an apartment in Hong Kong in September 2020 as a long-term investment. Mr Wong signed a three-year lease with Peter on 1 October 2020, and an initial premium of $60,000 was paid at that time. The lease period starts from 1 October 2020 and ends on 30 September 2023, with a monthly rental of $20,000. Management fees and rates are payable by the tenant, Peter. At Peter's request, Mr Wong spent $50,000 to repair this apartment. Mr Wong obtained a bank loan from Hong Kong Bank to finance the acquisition of the apartment. He paid $300,000 to Hong Kong Bank for the year of assessment 2020/21 as interest on this loan. Mrs Wong is a secretary in a Hong Kong company and earned a salary of $400,000 for the year. During the year of assessment 2020/21, she made mandatory MPF contributions of $18,000 and a cash donation of $50,000 to the Hong Kong Community Chest (an approved charity). Mrs Wong participates in a partnership with her mother running a flower shop. They share the profits and losses on a 50:50 basis. For the two years 2019/20 and 2020/21, the flower shop had the following results: Year of assessment 2019/20: Allowable loss $300,000 Year of assessment 2020/21: Assessable profits $360,000 Mr and Mrs Wong did not elect for personal assessment for the year of assessment 2019/20. They lived in a leased property in Central and paid $400,000 rental for the year 2020/21. They have one child, aged 19, studying full-time in London. Mr Wong maintained his mother and paid $4,000 per month to his mother (aged 70), who is living alone in Hong Kong Required: (a) Should Mr. and Mrs. Wong elect for personal assessment? Explain. (5 marks) (b) Assume that Mr and Mrs Wong elect for personal assessment jointly for the year of assessment 2020/21. Prepare the tax computation and compute the tax payable by them for the year of assessment 2020/21. (20 marks) Mr Wong established a partnership with his friend, Lewis, in Hong Kong. For the year of assessment 2020/21, the partnership incurred a tax loss of $160,000, and the loss is attributable to Mr Wong and Lewis on a 50-50 basis. Mr Wong has no tax loss bought forward from last year under this partnership. Mr Wong also established a sole proprietorship book shop in Hong Kong. Mr Wong donated $60,000 (under the name of the book shop) to World Vision (an approved charity) and the sole proprietorship earned a profit of $40,000 after deducting the donation for the year of assessment 2020/21. On 10 April 2021, Mr Wong received $80,000 as a director's fee from Herme Ltd, a Hong Kong incorporated company established by Johnny, a friend of Mr Wong. Johnny told Mr Wong that the director's fee was approved on 10 March 2021 during the board of directors" meeting held in Hong Kong. Mr Wong has been the director of Herme Ltd since 2018, but he has not attended any board meetings of Herme. Mr Wong acquired an apartment in Hong Kong in September 2020 as a long-term investment. Mr Wong signed a three-year lease with Peter on 1 October 2020, and an initial premium of $60,000 was paid at that time. The lease period starts from 1 October 2020 and ends on 30 September 2023, with a monthly rental of $20,000. Management fees and rates are payable by the tenant, Peter. At Peter's request, Mr Wong spent $50,000 to repair this apartment. Mr Wong obtained a bank loan from Hong Kong Bank to finance the acquisition of the apartment. He paid $300,000 to Hong Kong Bank for the year of assessment 2020/21 as interest on this loan. Mrs Wong is a secretary in a Hong Kong company and earned a salary of $400,000 for the year. During the year of assessment 2020/21, she made mandatory MPF contributions of $18,000 and a cash donation of $50,000 to the Hong Kong Community Chest (an approved charity). Mrs Wong participates in a partnership with her mother running a flower shop. They share the profits and losses on a 50:50 basis. For the two years 2019/20 and 2020/21, the flower shop had the following results: Year of assessment 2019/20: Allowable loss $300,000 Year of assessment 2020/21: Assessable profits $360,000 Mr and Mrs Wong did not elect for personal assessment for the year of assessment 2019/20. They lived in a leased property in Central and paid $400,000 rental for the year 2020/21. They have one child, aged 19, studying full-time in London. Mr Wong maintained his mother and paid $4,000 per month to his mother (aged 70), who is living alone in Hong Kong Mr Wong established a partnership with his friend, Lewis, in Hong Kong. For the year of assessment 2020/21, the partnership incurred a tax loss of $160,000, and the loss is attributable to Mr Wong and Lewis on a 50-50 basis. Mr Wong has no tax loss bought forward from last year under this partnership. Mr Wong also established a sole proprietorship book shop in Hong Kong. Mr Wong donated $60,000 (under the name of the book shop) to World Vision (an approved charity) and the sole proprietorship earned a profit of $40,000 after deducting the donation for the year of assessment 2020/21. On 10 April 2021, Mr Wong received $80,000 as a director's fee from Herme Ltd, a Hong Kong incorporated company established by Johnny, a friend of Mr Wong. Johnny told Mr Wong that the director's fee was approved on 10 March 2021 during the board of directors" meeting held in Hong Kong. Mr Wong has been the director of Herme Ltd since 2018, but he has not attended any board meetings of Herme. Mr Wong acquired an apartment in Hong Kong in September 2020 as a long-term investment. Mr Wong signed a three-year lease with Peter on 1 October 2020, and an initial premium of $60,000 was paid at that time. The lease period starts from 1 October 2020 and ends on 30 September 2023, with a monthly rental of $20,000. Management fees and rates are payable by the tenant, Peter. At Peter's request, Mr Wong spent $50,000 to repair this apartment. Mr Wong obtained a bank loan from Hong Kong Bank to finance the acquisition of the apartment. He paid $300,000 to Hong Kong Bank for the year of assessment 2020/21 as interest on this loan. Mrs Wong is a secretary in a Hong Kong company and earned a salary of $400,000 for the year. During the year of assessment 2020/21, she made mandatory MPF contributions of $18,000 and a cash donation of $50,000 to the Hong Kong Community Chest (an approved charity). Mrs Wong participates in a partnership with her mother running a flower shop. They share the profits and losses on a 50:50 basis. For the two years 2019/20 and 2020/21, the flower shop had the following results: Year of assessment 2019/20: Allowable loss $300,000 Year of assessment 2020/21: Assessable profits $360,000 Mr and Mrs Wong did not elect for personal assessment for the year of assessment 2019/20. They lived in a leased property in Central and paid $400,000 rental for the year 2020/21. They have one child, aged 19, studying full-time in London. Mr Wong maintained his mother and paid $4,000 per month to his mother (aged 70), who is living alone in Hong Kong Required: (a) Should Mr. and Mrs. Wong elect for personal assessment? Explain. (5 marks) (b) Assume that Mr and Mrs Wong elect for personal assessment jointly for the year of assessment 2020/21. Prepare the tax computation and compute the tax payable by them for the year of assessment 2020/21. (20 marks) Required: (a) Should Mr. and Mrs. Wong elect for personal assessment? Explain. (5 marks) (b) Assume that Mr and Mrs Wong elect for personal assessment jointly for the year of assessment 2020/21. Prepare the tax computation and compute the tax payable by them for the year of assessment 2020/21. (20 marks)

Answer rating: 100% (QA)

Answer a Mr and Mrs Wong should consider electing for personal assessment if they believe that doing so would result in a lower overall tax liability ... View the full answer