Deductions

Section 11(a) of the Income Tax Act allows a deduction for expenses actually incurred during the year of assessment in the production of income, provided they are not of a capital nature.

• TRUE

• FALSE

Section 11(d) deductions apply to improvements made to property used for trade purposes.

• TRUE

• FALSE

Legal expenses under Section 11(c) are deductible if they are not of a capital nature and are incurred in respect of a claim, dispute, or action at law.

• TRUE

• FALSE

An allowance of 5% is calculated on the cost of any patent, invention, copyright and TRADEMARK exceeding R5000.

• TRUE

• FALSE

Answer explanation

s11gC does NOT apply to trade marks. Any patent or copyright less than R5 000 is fully deductible.

s11gC allows a 10% allowance on design only . see proviso

According to the Burgess case, the definition of carrying on a trade is broad enough to include employment.

• TRUE

• FALSE

Which of the following is NOT a requirement for a deduction under Section 11(a)?

• The expense must be incurred during the year of assessment.

• The expense must be closely linked to the production of income.

• The expense must be of a capital nature.

• The expense must be actually incurred.

Under Section 11(d), repairs are deductible if:

• They extend the useful life of an asset.

• They restore the asset to its original condition.

• They significantly improve the value of the asset.

• They are capital in nature.

A taxpayer incurred the following expenses:

• R40,000 on repairs to a factory.

• R25,000 on legal fees to recover unpaid invoices.

• R15,000 on private medical expenses.

• R50,000 on installing a new roof for the factory.

Calculate the total deductible expenses for tax purposes.

• R130 000

• R65 000

• R40 000

• R80 000

A company’s truck driver receives regular traffic fines in the ordinary course of his duties. The amount of this expense on

the financial statements amounted to R3 420.

The amount is deductible under s11(a)

• TRUE

• FALSE

During its 2024 year of assessment ABC Ltd paid an ex-employee an amount of

R400 000 as a restraint of trade for 2 years. This amount was paid on

1 September 2024 and was included in the ex-empolyee’s gross income. What is the deduction allowable in the 2024 YOA?

• R400 000

• Rnil

• R133 333

• R200 000

Answer explanation

s11(cA) proviso: deduction is limited to the lesser of

• - R400 000/ 2 years = R200 000

-R400 000 x 1/3 = R133 333