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Organizational

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UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
FACULTY OF ACCOUNTANCY AND MANAGEMENT

ACADEMIC YEAR 2016/2017
MAY 2016 TRIMESTER
BACHELOR OF COMMERCE (HONS) ACCOUNTING – UBAT2023
BACHELOR OF ACCOUNTING (HONS) - UKAT2023
TAXATION I
GROUP ASSIGNMENT

Teaching Methodology
This teaching method uses a self-directed learning approach, where students are expected to take initiatives towards active self-learning. Therefore students are expected to research learning resources on their own, without the assistance of the lecturer/tutor and learn the required knowledge through self-study and group discussion.

Objective of Assignment
The objective of this assignment is to assess the student’s ability in the following areas – * Read, understand and analyse business information; * Extract relevant information for analysis and re-present these for specified taxation purposes; * Perform taxation research and apply the appropriate legal provisions to various situations. * Write and present a coherent report incorporating relevant explanations to support decisions and conclusions.

Formation of groups
Each assignment group shall have a maximum of 5 members.

Submission Instructions:
The completed assignment shall be submitted to your tutor by the due date stated below. A completed submission should include documents in the following order: * Cover page stating the tutorial group no. and the names & student ID of group members. * The written report

Due date for submission: Friday 5 August 2016, 2.00 pm
Due date for submission of the assignment is strictly adhered to. No extension of time will be allowed. Any assignment which is submitted after the due date may be subject to a penalty of 10% reduction of the maximum mark for each day of late submission. Assignment submitted more than 7 days after the due date will marked with zero (0) marks.

Guidelines for written report * The report should be word-processed, font-size 12, font Times New Roman, single spacing, double sided printed. Colour printing is NOT required and securely stapled at the top left corner. * Adhere to American Psychological Association (APA) referencing style. * Students are advised to keep a copy of assignment as the marked assignment will not be returned. * The report should not exceed 3,000 words in total.

Assignment Question 1
The Income Tax Act 1967 adopts a self-assessment system.
Required:
Discuss the obligations of a taxpayer under the Malaysian self-assessment system. The discussion should focus on both taxpayers with employment income as well as those with income from a business source, and cover, among others, the following aspects: 1) Assessment of tax payable 2) Payment of tax payable 3) Submission of tax return of income 4) Penalties for failure to comply with tax obligations under the law. (10 marks)

Question 2
A piece of Land owned by two brothers, Calvin and Alvin was disposed of during the year 2015 for a profit of RM2 million.
The land was purchased in 2005 when a friend of Calvin informed him of a sale advertisement in the newspaper. The brothers thought it would be a good idea to build homes for their families and their children’s families upon their retirement. Calvin withdrew his money from Employees Provident Fund while Alvin withdrew his money from his savings to pay for 75% of the cost of the purchase. The remaining 25%, both of them jointly agree to finance by loan (Both agreed to take up loan from bank).
Two years after the purchase, the brothers were approached by a used car dealer who wished to buy the land. The brothers declined the offer to sell the land but agree to rent it out to the used car dealer for a period of three years. Upon the expiry of the tenancy agreement, a portion of the land was planted with fruits which were then distributed among the brothers’ relatives and friends.
In December 2015, the land was sold in order to settle the debts owed by Alvin as well as to pay for the overseas education of Calvin’s children. This was the brothers’ first sale transaction of real estate.

Required: Discuss whether the profit of RM2 million is liable to Malaysia income tax. (10 marks)

Question 3

Mr Tan Yat was the Finance Director of BMZ Berhad until he retired on 31 October 2015 upon reaching his 55th birthday. He has been working with the BMZ Berhad and its subsidiary companies since 1 June 1990.

Mr Tan’s remuneration from his employment with BMZ Berhad relating to the calendar year 2015 were as follows: 1) Salary – RM15,000 per month 2) 2 months’ bonus for the calendar year 2014 paid on 28 January 2015. 3) Entertainment allowance of RM1,200 per month. 4) Gratuity of RM350,000 upon his retirement. 5) Director’s fee of RM20,000 for the financial year ended 30 September 2014 paid on 15 February 2015. 6) Director’s fee of RM15,000 for the financial year ended 30 September 2015 paid on 15 February 2016. 7) A Toyota Camry that had cost the company RM177,000 when it was bought new in June 2009. 8) A company driver with salary of RM1,700 per month. 9) A fully-furnished apartment for which the company. The rental for the unfurnished apartment was RM6,500 while the furniture had cost the company RM50,000 when it was first purchased in the year 2013. 10) Leave passage paid by employer for Mr Tan’s vacation in 2015 with his wife and children: | | RM | March | India | 2,400 | April | Hong Kong | 2,500 | May | Langkawi | 1,800 | June | Mulu Caves | 2,500 | July | Finland | 17,500 | August | Kelantan | 1,000 | September | Penang | 2,200 |

11) Mr Tan contributed to the Employee’s Provident Fund at the statutory rate of 11% while the company contributed at the rate of 17% of salary, allowances and bonus. 12) Medical and dental benefits amounting to RM8,500 for Mr Tan and his children. 13) A new Samsung S6 hand-phone costing RM2,500 was provided to Mr Tan and the company paid his hand-phone bills totaling RM4,700. 14) Mr Tan incurred entertainment expenses of RM14,000 for company purposes.

Mr Tan - Property
Mr Tan bought a new condominium in Petaling Jaya in February 2015. He rented out the apartment at RM1,500 per month on a short lease from 1 April 2015 until 30 September 2015. Mr Tan moved into the apartment with his family upon his retirement. The following is the amount of payments made during the year:

| RM | Assessment and quit rent for the period February to December 2015 | 1,500 | Maintenance fee of RM250 per month | 3,000 | Legal fees on the tenancy agreement contract | 1,500 |

Information relating to Mrs Tan 1) Mrs Tan started a Mini-market in Puchong in March 2015 and the following information has been provided relating to the year of assessment 2015:

Adjusted Loss – RM3,000
Capital allowance for the year of assessment 2015 – RM5,000

2) Mrs Tan purchased a new semi-detached which is gated with security guards at Puchong in June 2012. She had rented out at RM4,000 per month since October 2012 and for the whole of 2015. The following are the expenses relating to the property made during the year:

| RM | Assessment and quit rent for year 2015 | 2,500 | Maintenance fee of RM250 per month | 3,000 | Extension of living room | 3,200 | Housing Loan instalment (Interest – RM8,000) | 24,000 | Installation of air conditioner | 2,000 | Repairs to bathroom | 700 |

Other information
Mr and Mrs Tan have five children. The education and maintenance cost for the children is approximately RM100,000 per annum. Their relevant particulars are as follows: (i) Ah Lan was 26 years old in 2015 is pursuing a Master of Commerce degree full-time with Inti University in Kuala Lumpur (ii) Ah Hoong was 25 years old in 2015 is married and is staying with her husband at Kuala Selangor (iii) Ah Loong was 21 years old in 2015, single is pursuing a Bachelors’s degree at Universiti Tunku Abdul Rahman. He earns RM7,000 from his blogging activities in 2015. (iv) Ah Mei turned 18 years old in 2015 and was pursuing Foundation Studies at Universiti Tunku Abdul Rahman. (v) Ah Sai 16 years old in 2015 and was in Form 5 in 2015.

Other tax relevant information relating to the year 2015 for Mr and Mrs Tan are as follows:

| Mr Tan | | Mrs Tan | | RM | | RM | Premiums paid on insurance policies: | | | | - life policy on own life | 2,400 | | 1,350 | - education for children | 2,300 | | - | Cash donation to WWF (an approved institution) | 3,000 | | 5,000 | Purchase of books and journals | 1,200 | | 500 | Complete medical examination expenses (self) | 400 | | 700 | Medical expenses for parent | - | | 6,000 |

Required:

(a) Prepare the tax computation that would result in the lowest overall tax payable for Mr and Mrs Tan for the year of assessment 2015 on each of the following bases: (i) separate assessments for Mr and Mrs Tan; (ii) Mrs Tan elects for combined assessment. Note: In your answer, you are required to make proper classification (by reference to Sections 4 and 13 of the Income Tax Act 1967). State "Exempted" for every item of income exempted from tax and "Nil" for every item that is not taxable or not deductible. The prescribed value method is to be applied for valuation of benefits-in-kind. (20 marks) (b) Discuss – (i) whether it is beneficial for Mrs Tan to elect for combined assessment for the year of assessment 2015. (ii) how Mr and Mrs Tan could have planned their affairs differently to reduce their overall tax payable for the year of assessment 2015. (10 marks)
[Total: 30 marks]

Assignment - Cover Page

UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE

BACHELOR OF COMMERCE (HONS) ACCOUNTING
MAY 2016 TRIMESTER

UBAT2023 TAXATION I - group ASSIGNMENT

Submitted by: (Name and Student ID of Members)

Tutorial Group:

Marking Scheme and Award

Marks shall be awarded as follows:

Assessment Area | Q1 | Q2 | Q3(a) | Q3(b) | | All. | Award | All. | Award | All. | Award | All. | Award | Discussion of Issues | 8 | | 8 | | | | 8 | | Computations & Workings | | | | | 18 | | | | Presentation and Format | 2 | | 2 | | 2 | | 2 | | Total | 10 | | 10 | | 20 | | 10 | | Total Score | | /50 |

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