LAW OF TAXATION AND ESTATE PLANNING LECTURER: MR RICHARD POOLE

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LAW OF TAXATION AND ESTATE PLANNING LECTURER: MR RICHARD POOLE 1. INTRODUCTION 1.1 Overview A basic knwledge f taxatin is fast becming a selling pint fr prspective emplyers, nt just in law firms.

1 LAW OF TAXATION AND ESTATE PLANNING LECTURER: MR RICHARD POOLE 1. INTRODUCTION 1.1 Overview A basic knwledge f taxatin is fast becming a selling pint fr prspective emplyers, nt just in law firms. Accunting and audit firms are recruiting law graduates with knwledge f taxatin fr emplyment in their legal cmpliance departments. The Law f Taxatin and Estate Planning elective is aimed at prviding candidates with a basic theretical knwledge f certain imprtant aspects f the Incme Tax Act 58 f 1962, and the Value-Added Tax Act N. 89 f In particular, attentin is drawn t the fllwing: Grss Incme Definitin (Sectin 1 f the Incme Tax Act N 58 f 1962 the Act ) Special inclusins in grss incme (Sectin 1) Selected exemptins applicable t individuals Trade deductins (specifically Sectin 11(a)) Prhibited deductins (Sectin 23) Selected special deductins (cntained in Sectins 11, 11A,) Qualificatin fr taxatin as a small business crpratin (SBC) Intrductry elements f capital gains tax, especially with regard t prperty transactins Intrductry elements f value-added tax in terms f the Value-Added Tax Act N. 89 f 1991 Tax planning and anti-avidance prvisins (Sectins 80A-L), 103(2) & (5)) Anti-avidance in estate planning (Sectins 7 & 25B) Dnatins tax (Sectins 54-56) The purpse f the curse is t prvide students with a basic knwledge f the incme tax system in Suth Africa. The curse is ffered at as an elective in the final year f the LLB prgram in the Law Faculty. 1

2 1.2 Credit Value This curse has a credit value f 30. Students will be expected t spend at least 300 hurs f study time n this curse, althugh extra time is recmmended and encuraged. This includes time spent in lectures. 1.3 Assumptins f Prir Learning It is assumed that students have the ability t present an infrmed, lgical argument, given a specific set f circumstances. As the curse is theretically funded, students are nt required t be prficient in the use f financial calculatrs, nr are students required t perfrm detailed calculatins. Basic calculatins may be required frm time t time in rder t supprt r substantiate an argument. 2. OUTCOMES 2.1 Critical Crss-Field Outcmes Students will be able t: a. identify and slve prblems b. cllect, analyze and evaluate infrmatin c. cmmunicate effectively d. recgnize prblem slving cntexts e. explre educatin and career pprtunities f. develp entrepreneurial pprtunities 2.2 Specific Intended Outcmes On cmpletin f this curse students will be able t: Interpret the definitin f grss incme in Sectin 1 f the Incme Tax Act (as it applies t residents and nn-residents) and determine the taxability f a receipt and the nature f such receipt. Identify special inclusins in grss incme. Identify certain specific exemptins cntained in sectin 10 f the Incme Tax Act Determine the incme tax deductibility f different frms f expenditure in carrying n a trade (the general deductin frmula in sectin 11(a)). Determine the availability f selected special capital and ther allwances are available t taxpayers and in what circumstances such deductins are available (in terms f sectins 11 and 11A). Determine incme and taxable incme. Identify a small business crpratin fr incme tax purpses and discuss the varius tax cncessins that are available t such entities. Determine the circumstances in which an individual r crprate wuld be liable fr capital gains tax n the dispsal f selected assets (in terms f the eighth schedule t the Act). Determine the Value-Added Tax implicatins f certain selected transactins. 2

3 Discuss certain anti-avidance prvisins cntained in sectins 7, 23 and 80A-L, 103(2) & (5), and their applicability t individuals in the cntext f tax planning and tax avidance. Discuss the applicability and effect f the prvisins f sectins 7 and 25B n the use f trusts in estate planning. Discuss the incidence f dnatins tax as cntemplated in sectins 54 t 56 f the Act. 3. TEACHING METHODS The curse will cnsist f tw 45-minute lectures per week. A tutrial will be held nce a week fr the purpses f ging thrugh past test, exam and tutrial questins. The tutrial may be used fr make-up lecture as required. In additin, students will write a class test and be required t submit an assignment in the frm f an essay. A 2-hur examinatin will be sat at the end f the semester. 4. COURSE/MODULE CONTENT The fllwing tpics are examined in Law f Tax and Estate Planning: Sectin 1: Meaning f grss incme The ttal amunt In cash r therwise Received by r accrued t During the year f assessment Capital incme v revenue incme Surce, residency & withhlding taxes Sectin 10: Exempt Incme Interest frm lcal and freign investments Dividends Sectin 11(a): The general deductin frmula Expenditure and lsses Actually incurred During the year f assessment In the prductin f incme Capital expenditure v revenue expenditure Special inclusins in grss incme 3

4 Sectin 11: Specific allwances Legal fees Restraint f trade payments Repairs Bad and dubtful debt allwances Emplyer cntributins t retirement funds Deductins ir brad-based emplyee share purchase plans Annuities Repayment f emplyee benefits Sectin 11A: Pre-trade expenditure Sectin 20: Assessed lsses Sectin 23: Prhibited deductins All expenditure and lsses specifically disallwed in terms f sectins 23(a)-(m) Eighth schedule: Capital gains tax transactins (with particular applicatin t fixed prperty dispsals) Value-Added Tax Act : Intrductin t value-added tax Tax Planning, estate planning & anti-avidance Sectins 80A-l, 103(2) & (5) Sectins 7(1)-(10) Sectin 25B Dnatins tax Rate f tax Exemptins Liability fr and due date f payment 5. RESOURCES There are n prescribed texts fr this curse. Hwever, the fllwing reference texts are as fllws: Stighligh M (Ed.), Kekemer A, van Zyl L, Wilccks JS, de Swardt RD (2015): SILKE: Suth African Incme Tax 2016, LexisNexisButterwrths, Durban SAICA Legislatin Handbk 2015/16, Lexis Nexis Butterwrths, Durban Silke n Suth African Incme Tax, Lexis Nexis Butterwrths, Durban 4

5 Williams, R C (2015): Incme Tax in Suth Africa: Cases and Materials, 4 th Ed. (r 3 rd Ed.) Lexis Nexis Butterwrths, Durban These texts are available n shrt lan in the Law library. 6. STUDENT ASSESSMENT Specific Outcmes Assessment Criteria Assessment Tasks Interpret the Grss Incme Definitin cntained in Sectin 1 f the Incme Tax Act (as it applies t residents and nn-residents) and determine the taxability f a receipt/accrual and the nature f such receipt/accrual. Determine the residency status f a persn Determine the surce f incme, and whether a persn will have t include an amunt in their grss incme r nt Determine the applicability f withhlding taxes n certain frms f incme demnstrate knwledge f the grss incme definitin and its applicatin by frmulating answers t tutrial and test questins and applicatin f case law t scenari analyses. Students must be able t discuss and apply case law and legislatin t determine the residency status f a persn Students must be able t discuss and apply case law and legislatin t determine the residency status f a persn Students must demnstrate a knwledge f the withhlding taxes n ryalties, prceeds frm the sakle f fixed prperty, and incme accruing t freign sprtspersns and Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Pssible essay tpic (frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Pssible essay tpic (frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Pssible essay tpic (frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) 5

6 Identify special inclusins in Grss Incme. Identify selected frms f incme that amunts that are exempt frm taxatin. Determine whether certain expenditure is deductible in carrying n a trade. Determine the availability f selected special capital and ther allwances t taxpayers and in what circumstances such allwances are available. entertainers, and when they are applicable Students must demnstrate knwledge f the special inclusins by reference t the sectins in terms f which they are included, and by crrect applicatin f knwledge t scenari analyses. Students are required t demnstrate their knwledge f the exemptins granted in the Act by reference t crrect sectins f the Act and their applicability in scenari analyses. Students must demnstrate knwledge f what cnstitutes a trade and the deductins that are available t taxpayers carrying n a trade. Students are als required t demnstrate knwledge f applicable case law t supprt all cntentins made. Students must demnstrate knwledge f what special deductins are available t emplyed taxpayers and taxpayers carrying n a trade. Students are als required t demnstrate knwledge f applicable case law t supprt all cntentins made. Pssible essay tpic (frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Pssible essay tpic (frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Pssible essay tpic (frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Pssible essay tpic (frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Pssible essay tpic (frmative) Determine liability fr capital gains tax in relatin t selected asset and ther prperty Students are required t demnstrate a basic knwledge f the prvisins f the eighth schedule t the Act in relatin t prperty dispsals Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) 6

7 Determine the Value-Added Tax cnsequences f varius transactins Discuss the applicability and effect f the prvisins f sectins 7 and 25B n the use f trusts in estate planning Discuss the incidence f dnatins tax as cntemplated in Sectins 55 thrugh 65 f the Act. Students must demnstrate a basic knwledge f the prvisins f the Value- Added Tax Act and hw the prvisins theref may affect certain selected transactins Students are required t demnstrate knwledge and applicability f the varius anti avidance sectins f the Act and their applicability in practical situatins. Students are required t demnstrate an ability t apply the prvisins f these sectins t scenaris in the cntext f tax and estate planning undertaken by individuals and thers. Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Submit answers t tutrial and test questins (frmative) Submissin f slutins t questins frm past exam papers (frmative) Class discussin(frmative) Students final mark will be weighted as fllws: Test (frmative) 20% Essay assignment (frmative) 10% June examinatin (summative) 70% Ttal 100% 6. EVALUATION The curse will be evaluated by peer evaluatin and crrespndence with the class. This will give the lecturer insight as t hw the curse can be imprved. Students and peers will als have the pprtunity t give feedback n hw the curse was structured and hw the teaching styles and presentatin techniques culd be altered t imprve the structure f the curse and its delivery. Thus it is hped that nt nly will the students be benefiting frm the evaluatin prcess, but als the lecturer will be in a psitin t imprve his/her teaching ability. HEQC audits are evidence based. Once the template has been cmpleted, it is necessary t cllect evidence t substantiate the claims made. This evidence culd be cllected in a bx file and culd include, fr example, curse guides, lecture ntes, assessment tasks (including sme marked examples), student evaluatins r evaluatin analyses. Any actin resulting frm evaluatin culd als be nted. 7

LAW OF TAXATION AND ESTATE PLANNING LECTURER: MR RICHARD POOLE

LAW OF TAXATION AND ESTATE PLANNING LECTURER: MR RICHARD POOLE 1. INTRODUCTION 1.1 Overview A basic knwledge f taxatin is fast becming a selling pint fr prspective emplyers, nt just in law firms. Accunting