Week 7 - s23g Deductions Flashcards
(37 cards)
s23g rules for deductions?
no deductions are allowed from income (derived from trade) for expenses which were not laid out for purposes of trade
apportionment in s23(g)?
- for trade purpose = deductible
- non-trade purpose = non-deductible
case law principles on trade expenditure?
- link between a comp’s trade and the exp incurred must not be too remote to = deductible
- the expense did not have to produce profit in itself
borrowing money and re-lending at a higher rate of interest?
= trade = deductible
pre-trade expenditure?
spent before business is begun – usually capital in nature as it is spent setting up the income earning structure
s11A?
- taxpayer can claim a deduction in year that trade commences for expenses/losses actually incurred prior to the commencement of / in prep for carrying on that trade
when is s11A allowed?
only allowed if the amount would have been deductible in terms of s11, D or s24J but were not allowed when incurred
insured losses?
must be a direct link between loss and amt recoverable. only leftover portion not covered by insurance deductible and don’t include payout in gross income.
prohibited deductions section?
s23
expenses incurred for the purpose of earning exempt income?
apportion = if earns both exempt and non, apportion based on the total
expenditure relating to employment / holding of office?
no deduction allowed for individuals who earn remuneration (not agents earning commission), unless specifically permitted
the cost of domestic / private expenses?
(groceries, school fees) = no deduction
- except in respect of property occupied for the purpose of trade – where it is specifically equipped and occupied exclusively & regularly for trade
- the taxpayer will not be entitled to a deduction if their trade constitutes employment, unless income = mainly comm and duties are performed mostly outside employer-provided office OR employees duties performed mainly in such part
s23B?
- contains a prohibition against double deductions under more than 1 inc tax act section
- no deduction allowed under s11(a) if a deduction is granted under any other section that may impose limitations and may be granted in a different YOA
general principle of specific deductions?
- requirements must be met = deduction
- consider if there is a limitation to the deductible amount
specific interest deduction?
any int exp actually incurred by the taxpayer during the YOA from carrying on trade if in production of income
specific legal exp deduction?
- actually incurred in respect of any claim, dispute
- must not be capital
- incurred in respect of claim amount which would not have been deductible under s11a (we get sued)
- incurred in respect of claim made by taxpayer which does not constitute income (we sue)
specific bad debts deduction?
must be:
- due to taxpayer
- become bad during year
- in resp of amts included in taxpayer’s income this yr (accured amount)
req for restraint of trade pmt deduction?
amount must be:
- actually incurred in course of trade
- imposed on natural person
- will be included in GI of person who receives it
restraint of trade payments amount specs?
cannot exceed the lesser of:
- pmt amount / no of years
- amount incurred / 3
specific doubtful debts deductions?
- debts must qualify for s11(i) (BD) if they go bad
- every year the allowance must be reversed before we can claim the current year allowance
requirements for an IFRS comp (doubtful debts)?
- 40% of the sum of the allowance measured in terms of lifetime exp credit losses and any debs written off for FR
- 25% for other allowances
how to calc for an non-IFRS (doubtful debts)?
- 25% for debts 60+ days in arrears
- 40% for debts 120+ days in arrears
method for doubtful debts deduction?
add back previous year deduction
less 40% and 25%
= negative amount is the deduction
employer contributions to funds deductions?
full deduction for contributions to:
- pension
- provident
- retirement annuity fund
allowed as per s11F
