ASSIGNMENT (20%)

TRIMESTER 1, 2019/2020
BAC2674
TAXATION I

Objectives:
Student should be able achieve learning outcome 1: Analyze the concepts of income tax
applicable to individuals who are either employed, self-employed or who are partners in
businesses.

Instructions:
1. This is a group assignment (6 students in one group)
2. Assignment should be type written.
3. Any plagiarism will be penalized accordingly

PLAGIARISM: MARKS DEDUCTION. If plagiarism is detected, marks would be deducted

as follows:

% of Similarity % of Marks Deduction

0 – 20 0
20.01 – 40 10
40.01 – 60 50
60.01 – 100 100

4. Deadline: the binding reports for assignment must be submitted on 27 September

2019/Friday (late submission will be penalized).

5. The minimum pages are 5 with 1.5 spacing. Please use time new roman with 12 font.
The margin should be 2 for top and bottom and 2.5 for left and right. Format report must have
cover page.
QUESTION

Farid, a Malaysian tax resident and works as a legal consultant with Flash Sdn. Bhd. His income
for the year ended 31 December 2018 is as follows:
RM
Salary 96,000
Entertainment allowance 3,600
Bonus 8,000

Flash Sdn. Bhd. provides benefits and incurred expenses for Farid as detailed below. Unless
otherwise stated, the benefits were provided for the full year 2018:

i. Monthly subscription in respect of Farid’s membership to a golf club amounting to

RM10,000
ii. Reimbursement of salary in respect of a driver employed by Farid amounting to
RM24,000.
iii. A domestic helper for Farid employed by Flash Sdn. Bhd. at a monthly salary of
RM900 commencing from 1 May 2018.
iv. Child care benefit for Farid children costing RM8,400.
v. The use of a car costing RM175,000 and petrol expenses amounting to RM12,000.
vi. Hotel room charges amounting to RM7,500 from 1 March 2018 to 31 March 2018.
vii. The use of a fully-furnished house provided by Flash Sdn. Bhd. commencing from
1 April 2018. The company incurred a rental expenses at RM2,300 per month. Farid
was required by the company to contribute a sum of RM500 per month for the
maintenance of the house commencing from 1 April 2018. The cost of furniture was
RM550 per month.
viii. Leave passage provided by the company for Farid’s holiday with his wife and
children:
a) In March 2018 to South of Korea:
RM
- Cost of air fare 6,000
- Cost of meals and accommodation 6,450
b) In December to Sabah, Malaysia:
RM
- Cost of air fare 2,400
- Cost of meals and accommodation 3,900

Farid claimed the following expense incurred during 2018:

RM
EPF 10,560
SOCSO 420
Entertainment expenses 5,500
Purchase of laptop 2,200
Medical examination for self 800
Life insurance for self 7,200
Monthly internet subscription 1,440
Farid also operates a restaurant business known as Jom Makan. Details of the operations of the
business for the year ended 31 December 2018 are as follows:

Jom Makan
Profit and Loss for the year ended 31 December 2018
Note RM RM
Sales 360,000
Less: Cost of sales (109,000)
Gross profit 251,000

Less: Expenses
Staff salaries 74,800
Employees' Provident Fund 1 16,000
Advertisement 2,100
Staff training 2 1,800
Entertainment expenses 3 2,100
Motor vehicle expenses 4 3,300
Water and electricity 1,750
Rental expenses 24,000
General expenses 18,400
Depreciation 8,400
Loss on disposal of the asset 5 2,800 (155,450)
Net profit before taxation 95,550

Notes:
1. Employees' Provident Fund was allowable at 19% on staff salaries.
2. Staff training was to upgrade and develop staffs’ technical skills and the training was
approved by the Ministry.
3. Entertainment expenses includes RM500 lunch incurred by Farid.
4. Motor vehicle expenses include insurance and repair on motor vehicle used in the
business of RM2,500 and the balance for traffic summons.
5. Foreign exchange loss related to purchase of raw material.

Additional information for Jom Makan:

The business purchased restaurant appliances on 15 October 2015 at the cost of RM85,000. In
April 2016, the business acquired a new van for commercial use at the cost of RM180,000
financed by hire purchase. It made an initial payment of RM18,000 in May 2016 and paid the
balance by 60 month instalments commencing in July 2016. The business is eligible to claim
capital allowance.

In February 2018, the business disposed its counter bar at the price of RM19,000 after five years
of acquisition. The residual expenditure for the asset in the year of assessment 2017 was
RM20,400. The business also has an unutilized business loss amounting to RM4,900.
Farid is a partner in the firm of Desmund, Farid & Co. The partnership accounts for the year
ended 31 December 2018 are as follows:

RM RM
Income 346,000
Less: Depreciation 5,800
Partners’ salaries:
Desmund 105,600
Farid 60,000
Partners’ interest on capital:
Desmund 21,000
Farid 8,400
Partners’ allowances:
Desmund 24,000
Farid 7,200 (232,000)
Net Profit 114,000

Additional information for Desmund, Farid & Co.:

- Capital allowances on partnership assets were RM9,700.

- Profit sharing ratio during the year were as follows:
Desmund Farid
January – April 2018 1 1
May – December 2018 2 1

Other information:

1. Farid is also a writer and received royalties from a series of books of RM56,000 in 2018.
He has incurred the following on the book writing:

RM
Editing and typing 7,200
Photocopies 3,100
Computer and printer 5,300
Printer 800

2. Farid received monthly rental income of RM1,800 from his apartment in Putrajaya. The
rent commenced from February 2018 and the tenant had paid a two-month rental deposit
and RM300 as utilities deposit.

3. Farid married with two children aged 19 and 12 years old respectively. The eldest is
currently studying A-Level in Malaysia and the second is primary school student. Farid
has saving accounts in SSPN's scheme for his children amounting to RM6,700. Farid
incurred medical and education insurance for his children and wife amounting to
RM3,400 per month. Farid wife is not working.
 4. Farid made an approved donation and zakat amounting to RM150 and RM300 per
month respectively. Farid also contributed book of RM2,000 to the orphanage (an
approved institution).

Instructions:
1. Compute Farid’s income tax payable for the year of assessment 2018. Show all
workings.
2. Download Form B for 2018 from the Inland Revenue Board website.
3. Complete the Form B using the answer in (1).