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Gross Income (Calculations Normal Tax Liability (Determining gross income,…

- - - - Resident
        
        Total amount
        
        In cash or otherwise
        
        received by, or accrued to, or in favour of such resident
        
        Received by
        
        PRINCIPLE
        --> An amount must be received by a person for their own benefit for it to be included in GI
        --> (Geldenhuys Vs CIR)
        
        PRINCIPLE
        --> If placed in a separate trust account outside of taxpayer's control, not included in GI
        --> (Pyott Ltd)
        
        Illegal Receipts
        --> Source of income whether legal or not is important
        --> business being illegal or legal is not material for the purpose of determining whether its income should be subject to tax
        --> (CIR vs Delagoa Bay Cigrarette Co, Ltd)
        
        PRINCIPLE
        --> Amounts received with the intention of retaining for own benefit, constitute receipts
        
        --> Tax payer is taxed on the earlier or receipt or accrual
        --> Income is recognised when it accrues irrespective of when it is received
        --> Timing difference between recognising income for accounting vs tax purposes
        
        Accrued to = Entitled to
        
        PRINCIPLE
        --> On date of credit sale, taxpayer acquires a right to future payment which has value
        --> This total value is included in the GI in the year of the transaction
        --> (Lategan vs CIR)
        
        PRINCIPLE
        --> Accrued = unconditionally entitles to
        --> Lategan/People's Store case amended
        --> (Mooi vs SIR)
        
        --> Tax payer must be unconditionally entitled to an amount in order to include in GI
        --> "unconditionally entitled" does not apply to received amounts
        --> received amounts included in GI despite possibility of having to repay
        
        --> only requirements for received amounts are that they must be received on own behalf and for own benefit
        
        In favour of
        
        --> (CIR vs Witwatersrand Association of Racing Clubs)
        
        In the year of assessment
        
        Received/accrued in the current YOA
        
        Excluding receipts or accruals of a capital nature
      - Non-resident
        
        Total amount in cash or otherwise
        
        There must be an amount received/accrued
        Accrued = Cash/Property/Assets (Lategan Court Case)
        
        Asset with no ascertainable money value or cannot be turned into money = Not included in gross income (Butcher Bros Court Case)
        
        Amount is not only money but the value of every form of property owned by payer, corporeal/incorporeal, and has money value (CIR Vs People's Stores)
        
        should no cash be received, the market value of the asset at the date of receipt or accrual is taxed
        
        Difficult to determine value of non-cash receipt
        Is it the objective or subjective value?
        (Butcher Bros)
        
        received by, or accrued to, or in favour of such person from a source within or deemed within the Republic
        
        In the year of assessment
        
        Not of a capital nature
        
        Principle: Fruit vs Tree
        --> (CIR vs Visser)
        
        Income is the product of capital
        --> Fruit
        
        Capital produces the income
        --> Tree
        
        Tests established to determine whether amount is of a capital nature
        
        Subjective Tests
        
        Aims to determine whether taxpayer is in profit making scheme
        --> This depends on intention
        
        1 more item...
        
        INTENTION
        --> The most dominant test
        
        6 more items...
        
        (Natal Estates vs SIR)
        --> Planning, extent, duration, nature, degree, orgnisation and marketing strategies in relation to the concept or profit making scheme will determine whether the taxpayer is realising the asset at best advantage or whether he engaged in a business venture
        
        Objective Tests
        
        Manner of acquisition
        
        3 more items...
        
        Manner of disposal
        
        3 more items...
        
        Period for which asset is held
        
        1 more item...
        
        Continuity
        
        2 more items...
        
        Occupation of taxpayer
        
        No change in ownership
        
        1 more item...
        
        Legal nature of the transaction
        
        1 more item...
        
        Nature of the asset
        
        Perpetuating a trade with anticipation of engaging in a profit making scheme