Simisola Dangote “Simi”, is a very successful South African based resident, with multiple business interests. Simi has always been interested in farming. He has earmarked a farm in Tongaat that he wishes to purchase. The farm will require a lot of development and he does not anticipate it being profitable “for a while”. He is convinced that his idea of establishing a sugar cane plantation and production plant on the farm will lead to yet another successful business venture. Simi estimates that the farm will provide 12 people with full time employment and create a further 40 seasonal job opportunities over time.

After discussing his plan with his friends, he was assured that he will be able to offset the farm losses against his other income, so long as he doesn’t make a loss in three out of the first five years.

Being a prudent businessman Simi has approached you, a recently registered Tax Practitioner to confirm his friends’ claim that the farm losses will reduce his tax liability, while the property is being developed.

Simi does not plan to place the farm in a company or trust, as he is worried about the capital gains tax implications should he eventually sell the property. Simi pays the maximum marginal rate for income tax purposes.

Write a letter to advise Simi of the possibility of reducing his tax liability by purchasing the farm and establishing a coffee plantation.

Answer rating: 100% (QA)

Subject Tax Planning Advice for Your Farming Venture Dear Mr Dangote I hope this letter finds you well I appreciate the opportunity to assist you in e... View the full answer