Page 10 - Gross Income class slides
P. 10
GROSS INCOMEOSS INCOME
GR
Total amount in cash or otherwise
Example 1
• John is the owner of a very successful electronics shop that competes
directly with retailers such as Incredible Connection. His best friend from
childhood, Simon, approaches him. Simon asks John to help Simon’s son set
up an electronics shop in another city. John agrees to help the son but notes
that he wishes to receive 5 computers from the new store with a cost of R20
000 each. They sell for R30 000 each.
• What will the “total amount” be that John receives in his capacity as owner
of an electronics shop? Would the solution be different if the person was
not a motor car dealer getting a car?
Solution:
• The computers are property that has an ascertainable monetary value. The
total amount that John receives will be R100 000 (5 computers x R20 000).
The cost is used in this instance as that is the value that John would be able
to acquire the computers for.
• If John was not the owner of an electronics shop the value would have been
R150 000 (5 computers x R30 000) which is the amount he would have had
to pay if he wished to purchase the computers as a person that does not
own an electronics shop.
• This is an application of the Lace Proprietary Mines case.
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