TAX2601 ASSIGNMENT 1 SEMESTER 2 2026 – FULLY ANSWERED (DUE 4 SEPTEMBER 2026)

Description

TAX2601 Assignment 1 Semester 2 MEMO | Due 4 September 2026. All questions fully answered. QUESTION 1 (14 marks, 17 minutes)
Portia Financial Advisory (Pty) Ltd (“PFA”), a South African resident company that provides financial advice and investment services to clients. PFA has a financial year ending on 28 February.
During the 2026 year of assessment, PFA acquired a high-net-worth client who entrusted the company with R1 million to invest in various South African investment funds on the client’s behalf. As compensation for its services, PFA will be entitled to 5% of any returns generated from the investments.
The R1 million was paid to PFA upfront on 1 June 2025. However, PFA kept the funds in a separate bank account and is contractually obliged to return any amount that remains uninvested to the client within the next 12 months.
REQUIRED
MARKS
With reference to the definition of gross income in section 1 of the Income Tax Act, discuss whether the R1 million must be included in Portia Financial Advisory (Pty) Ltd’s gross income for the 2026 year of assessment.