TAX3701 Assignment 2 Semester 2 2026 – Due 4 September 2026

Description

TAX3701 ASSESSMENT 2
QUESTION 1 (continued)
10. R2 750 to a local school. The school is not a registered public benefit organisation.
11. KGM paid the annual insurance of R240 000 for the period from 1 July 2025 to 30 June 2026 on 14
July 2025.
KGM has an assessed tax loss of R852 500 brought forward from the 2025 year of assessment.
KGM had the following non-current assets on 28 February 2026:
KGM purchased manufacturing machine XP second-hand on 1 April 2025 for an amount of R638 250
(including VAT) and brought it into use on 1 May 2025. For safety and insurance purposes KGM had to
build a special foundation costing R52 500 to mount machine XP that was paid on 28 April 2025 to a
contractor.
KGM purchased a new delivery truck at a total cost of R1 200 000 on 1 July 2025, and brought it into
use on 1 August 2025.
On 1 December 2025, a delivery truck that was bought new on 1 August 2024 for a total cost of R862
500 (including VAT) and brought into use on the same date, was stolen during an armed robbery
while delivering steel products to a client. On 2 January 2026, the insurer paid KGM an amount
of R540 000.
KGM bought new computers for a total cost of R150 000 for the marketing office on 1 May 2023 and
brought them into use on the same day.
12. KGM incurred the following rent related costs in 2026:
KGM signed a new lease agreement with Prop Holdings (Pty) Ltd on 1 August 2025 for a period of ten
years with the option to extend the lease agreement for another three years. The monthly rent payable
as from …
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TAX3701 ASSESSMENT 2
QUESTION 1 (continued)
The monthly rent payable as from 1 August 2025 is R25 250. KGM also paid a lease premium of R220
000 to Prop Holdings (Pty) Ltd on 1 August 2025.
In terms of the new lease agreement KGM had to make improvements to the existing factory building
on the leased land. The leasehold improvements should at least be R1 850 000. KGM started with the
leasehold improvements on 1 September 2025 and completed the leasehold improvements on 31
January 2026 at a total cost of R1 830 000 and brought it into use on 1 February 2026.
KGM purchased part of an improvement to a new commercial building on 4 October 2025 for a total
amount of R2 047 000 (including VAT) and brought it into use on 1 November 2025. The part of the
improvement to the new commercial building acquired will be used by the human resources
department of KGM.
Binding general ruling 7 provides for the following write-off periods:
Computer equipment — three years.
Delivery trucks — four years.
KGM received the following other income during the 2026 year of assessment:
Interest of R6 258 from South African banks.
Dividends of R63 690 from a foreign company. KGM only holds 6% of the equity…
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TAX3701 ASSESSMENT 2
QUESTION 1 (continued)
5. Restraint of trade payment
KGM made a restraint of trade payment of R180 000 on 1 June 2025 to Mrs. T Ndou, who has resigned
on 31 May 2025. Mrs Ndou is restricted for two years from the date of payment to compete with KGM.
The full amount paid was taxable in the hands of Mrs Ndou.
6. Learnership agreements
K