Class Exercise: Week 1
Harris Biden aged forty years, and a resident of the Republic, carries on poultry
and citrus farming in the Mpumalanga Lowveld. Harris is married to Mary-Joe and
have three minor children. The following information sets out his activities for the
2025 year of assessment:
RECEIPTS AND ACCRUALS R
Director’s fees received 12 000
Interest received (note 1) 24 850
Rentals received (note 2) 50 000
Sale of fruit 3 750 000
Sale of firewood 35 650
Sale of poultry 120 000
Sale of eggs 10 450
Sale of poultry manure (dung used to fertilizing land) 5 350
Subsidies received from the Government
- Eradication of noxious plants 5 500
- Interest to finance the purchase of farmland 4 000
- Sinking of borehole 1 000
EXPENSES
Animal feeds 37 850
Building cost of packing store 250 000
Cost of irrigation pump and pipes 75 350
Diesel & Oil 342 150
Eradication of noxious plants 55 000
Farming expenditure (all deductible) 2 375 850
Fertilizer and seed purchased 35 600
Insurance premiums
- Farm assets 25 750
- Growing crops 35 250
Interest paid on funds borrowed to finance the purchase of 40 000
farmland
Packing materials 7 850
Pesticides 10 450
Planting of new trees 50 000
Purchase of chickens 15 000
Repairs of farm equipment 238 500
Salaries and wages 150 450
Sinking of a borehole 10 000
Veterinary expenses 4 750
Notes
1. Interest income consist of:
Local interest received on savings account 6 100
Interest received from fresh produce market on the
retention of portion of the purchase price of fruit supplied
to it by Harris 18 750
2. Rental income consists of:
Rental income from the letting of farmland calculated at
5% of farming profits 20 000
Rental income from the letting of another portion of
farmland 30 000
3. Details of livestock movements were as follows:
Standard Marke Average Openin Closin
value t cost price g stock g
value stock
Poultry
over
nine 1 40 5 1 000 1 750
months
The above figures take into account the following:
Natural increase and death
500 hens, 18 months old, were given to Harris, during the tax
year, by his father
50 hens, 12 months old, were donated to his children’s school
for its annual fete
260 hens, 12 months old, were slaughtered as rations for the
labourers
52 hens, 12 months old, were consumed by Harris and his family
4. Details of produce movements were as follows:
Value of growing crops – 28 February 2024 1 000 000
Value of growing crops – 28 February 2025 1 500 000
Value of crops reaped but not sold – 28 February 550 000
2024
Value of crops reaped but not sold – 28 February 850 000
2025
Domestic consumption of produce market value of
R1 040 (with a cost of R350)
Products cultivated on the farm given to labourers
as rations market value of R5 320 (with a cost of R1
770)
5. The balance of capital expenditure unredeemed on 1 March 2024 was
R17 350. The fixed assets register revealed the following assets: A
Tractor was purchased on 1 May 2024 for R184 000 (Cost R160 000
plus VAT R24 000). A Sorting Machine was purchased on 1 March 2023
for R86 250 (Cost R75 000 plus VAT R11 250). A Planter was purchased
on 1 June 2022 for R40 250 (Cost R35 000 plus VAT R5 250). A
personal computer was purchased on 1 September 2024 for R8 050
(Cost R7 000 plus VAT R1 050). Second-hand office furniture was
purchased on1 October 2024 for R4 600 (Cost R4 000 plus VAT R600).
The Commissioner allows a write-off period of three years on personal
computers and six years on office furniture. Harris is a registered VAT
vendor. All these assets were brought into use immediately.
6. No other amounts accrued to Harris Biden in its 2025 year of
assessment.
Required
Calculate the 2025 taxable farming income of Harris Biden. All items mentioned
above must appear in your solution.