Tutorial question 1

Farid was appointed as a finance director of Essential Sdn Bhd on 1.1.2020. He did not own
any shares in the company. In 2020, he received the following remuneration/benefits:

i. Salary and allowance

RM (per month)
Salary 12,000
Entertainment allowance 2,000
Travelling allowance 1,000

ii. A contractual bonus equivalent to 2 month’s salary.

iii. A fully furnished bungalow for which the company paid a monthly rental of RM
5,000 which included RM 500 in respect of furniture and fittings.
iv. A new car costing RM 160,000. A driver employed by the company was assigned to
drive the car.
v. Reimbursement of RM 600 per month being monthly salary of a servant employed by
Farid.
vi. Free medical and dental benefits for him and his immediate family.

Farid incurred the following expenses in 2020:

RM 30,000 for entertaining the company’s suppliers and customers.

RM 6,000 on petrol and toll charges for travelling between his house and office.

Fatimah, Farid’s wife, was a partner in a trading business. She withdrew from the partnership
on 1.11.2020 after she was diagnosed to have marrow cancer in her lower limbs. As a result,
her legs were amputated on 20.12.2020. The total medical expenses amounted to RM 120,000,
of which Farid’s employer paid RM 80,000 and the balance was borne by him.

Farid received an insurance compensation of RM 250,000 under a medical insurance policy

taken by him in respect of his wife. He spent RM 6,000 on a pair of artificial limbs for his wife.

Farid and his wife have three unmarried children, whose relevant details are as follows:

i. Firdaus, the first child was born on 31.12.2002. He commenced a degree course at the
National University of Singapore in January 2020, for which Farid expended RM
10,000 for 2020.
ii. Fiona, the second child was born on 1.3.2006. She is studying at a secondary school in
Singapore.
iii. Fitri, the third child, was born on 1.6.2009. He is physically disabled.

Other information on Farid and his wife for 2020 are as follows:

Farid Fatimah
RM RM
(i) Partnership
 - Share of adjusted income/(loss) - (30,000)
- Share of capital allowances - 15,000
(ii) Dividends
- Malaysia 7,300 3,650
- Singapore (not remitted to Malaysia) - 15,000
(iii) Interest from fixed deposit with a bank in Malaysia 1,000 2,000
(iv) Interest from Setiawan Sdn Bhd (listed company) - 5,000
(v) Rental income - 12,000
(vi) Premium paid on insurance policies
-Life 4,500 3,500
-Medical (child) 4,000 1,800
(vii) Contribution to Employees’ Provident Fund 19,800 -
(viii) Cash donations to approved institutions 6,960 5,210

Required:
a) Compute the tax payable by Farid for YA 2020 assuming that his wife elects for combined
assessment.

b) Advise Fatimah as to whether she should elect for combined or separate assessment. Give
reasons for your answer.
Tutorial question 2

Cheong has the following income for the year ended 31 December 2020:

1. Sole proprietorship business:

RM
Net profit per accounts 37,000
After including the following: RM
Lottery winnings 3,000
Salary to Cheong 57,000
Employees Provident Fund 6,840
(Cheong’s personal contribution)
Van running expenses 9,000*
Depreciation 6,300
Donation to an approved charity 250
*The Inland Revenue Board has agreed that three-quarters of the van running expenses
were incurred for business purposes.

The capital allowances in respect of the van for YA 2020 amounts to RM 6,800.

2. Partnership business:
(The information stated below is in respect of the partnership unless stated otherwise)
RM
Divisible income 90,000
Approved donation 1,000
Capital allowances 300
Interest on capital (Cheong only) 2,500
The partnership comprises two partners. Cheong’s share of the profit is 40%

3. Rental income from a furnished house:

Statement of receipts and outgoings:
Receipts (rent and deposit): RM
January to July at RM 1,500 per month 10,500
(the house was vacant in August and September)
October to December at RM 1,600 per month 4,800
Rent deposit from new tenant(refundable) 3,200
18,500
Outgoings: RM
Quit rent and assessment 300
Refund of rent deposit to outgoing tenant 2,900
Cost of replacing the lounge furniture 3,100
Fire insurance 170
Fine paid to City Hall for breeding mosquitoes 400
(6,870)
Net 11,630

4. Gross dividend amounting to RM 1,000 received in October 2020.

Cheong made the following claims for YA 2020:
 - Tax relief for his wife who has been living together with him until their divorce on 1
July 2020. His wife had no income in 2020.
-Personal contribution to Employees Provident Fund.

Required:

Compute the tax payable by Cheong for YA 2020.

Tutorial question 3

Tina Ong, the sole proprietor of a food catering business, submits her profit and loss account
for the year ended 31 December 2020 as follows:

Notes RM RM
Sales 189,000
Less:
Cost of Sales 1 56,840
Remuneration 2 74,700
Van running expenses 3 17,200
Leave Passage 4 960
Donations(approved) 300
150,000
Net Profit 39,000

Notes:
1. Cost of sales includes the cost of meals consumed by Tina Ong and her family
amounting to RM 10,800. The catering price of these meals would be RM 13,000.
2. Remuneration includes a sum of RM 50,400 in respect of the salary paid to Tina Ong.
3. The van, which was leased by Tina Ong, is used partly for private purposes. The IRB
has accepted that one quarter of the van expenses are attributable to these private
purposes.
4. The leave passage cost relates to a trip made by Tina Ong and her children to visit her
parents in Sabah
Tina Ong owns three shop houses and residential house which were all rented out during the
year 2020. The receipts and payments in respect of each of the properties for the period 1
January 2020 to 31 December 2020 were as follows:

Shop house in Penang-rent at RM 2,400 per month

RM RM
Receipts:
Rental January to December 28,800
Water & Electricity deposit 1,200
30,000
Payments:
Assessment 1,660
Penalty for late payment of assessment 90
Quit Rent 360
Interest on loan used to acquire the shop house 22,400
24,510
5,490

Shop house in Ipoh-rent at RM 700 per month

RM RM
 Receipts:
Rental January, November & December 2,100
Rent Deposit (refundable) 700
2,800
Payments:
Fire Insurance 550
Repairs 2,900
Agent’s Fees 700
4,150
(1,350)

Shop house in Kuala Lumpur-rent at RM 4,000 per month

RM RM
Receipts:
Rental for January to April 16,000
Rent deposit forfeited 4,000
20,000
Payments:
Cost of improvement to property 8,200
Interest on loan used to acquire the shop house 29,000
37,200
(17,200)

Residential house-rent at RM 1,000 per month (October to December 2020)

RM RM
Receipts:
Rental commenced on 1 October 2020 (not previously rented out) 3,300

Payments:
Assessment for full year 480
Quit rent for a full year 120
Agent’s fees to find tenant 1,100
1,700
1,600

Tina Ong received alimony to RM 19,200 in YA 2020

Tina Ong made the following claims in her tax return for YA 2020:
• Maintenance of her two children, aged 9 and 10 (nobody else contributed).
• Insurance premiums amounting to RM3,700 in respect of her own life.

Required:

a) Explain your treatment of the rental of properties

b) Compute the chargeable income of Tina Ong for YA 2020.