Page 8 - Test 1 Slides - 4. Gross Income
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GROSS INCOME
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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