Investment income - question and solution TAX

Question.              

The following information refers to Peter for the tax year 2009.

(1)     Peter owns two properties, which are let out. Both properties are freehold houses, with the first property being let out furnished and the second property being let out unfurnished.

(2)     The first property was let from 6 April 2009 to 31 August 2009 at a monthly rent of Tshs 500,000/= payable in advance in each month. On 31 August 2009 the tenant left owing two months’ rent which Peter was unable to recover and the Commissioner for Domestic Revenue had accepted the amount as bad debt. The property was not re-let before 5 April 2010. During March 2010 Peter spent Tshs 200,000/= repairing the roof of this property. 

(1)     The second property was purchased on 1 July 2009, and was then let from 1 August 2009 to 1 April 2010 at a monthly rent of Tshs 820,000/= payable in advance in every month. During July 2009 Peter spent Tshs 200,000 on advertising for tenants. For the period of 1 July 2009 to 1 April 2010 he paid loan interest of Tshs 1,000,000/= in respect of a loan that was taken out to purchase this property.

(2)     Peter insured both of his rental properties at a total cost of Tshs 660,000/= for the year ended 31 December 2009, and Tshs 900,000/= for the year ended 31 December 2010. The insurance is

(3)     Peter Sold his investment of 100 shares in Twiga Cement (Pty) Ltd costing 12,228,500/= were sold for 21,025,260/= in February 2009.

(4)     Peter also received a dividend of Tshs 2,000,000 during the year from Twiga Cement where he owns 5% of all shares and withholding tax of Tshs 100,000/= was deducted.

(5)     During the tax year 2009 Peter received bank interest of Tshs 1,000,000/= from DECI a financial institution based in Dar es Salaam.

Required:

Calculate the Investment Income of Peter for the year 2009.

Suggested Solution

Computation: Employment Income

Tax Payer: Peter

Year of Income: 2009

Residential Status: Resident Individual

Rent from properties (Final)	Nil
Bad Debt for the rent	Nil
Advertising expenditure for tenants	Nil
Loan interest paid	Nil
Insurance premium paid	Nil
Gain on sale of shares (21,025,260 – 12,228,500)	8,796,760
Dividend received (Final)	Nil
Interest earned from DECI (Final)	Nil
Taxable Investment Income	8,796,760

credits to: Kessy Juma :: http://www.taxation-tz.blogspot.com