Q1. Explain the tax treatment for the following transactions under article (9) of the income tax law 7.5 marks)
a. Tax payer has personal asset valued at SAR 100,000 a cost base of SAR 80,000. Earning gains of SAR 20,000. What is the gain or loss on the disposed asset?
b. Tax payer has an asset of two components and he disposed one component for SAR 50,000 Cash. The tax payer purchased that asset for SAR 100,000 Cash 5 years ago. The expert valued that assets at the time of purchase for SAR 200,000 out of which SAR 70,000 was belong to the disposed component. What is the gain or loss on the disposed asset?
c. Tax payer possess land with book value of SAR 100,000 and he paid SAR 20,000 Cash to improve the land. Are expenses deductible?
d. Tax payer disposed an asset encumbered by debt amounted to SAR 120,000 but Its market value is SAR 100,000 with cost base of SAR 80,000 .What is the gain or loss on the disposed asset?
e. Tax payer converted an asset used in the activity to his personal use with a cost base of SAR 50,000 and market value of SAR 40,000. What is the gain or loss on the disposed asset and whether gains or losses taken into consideration when determining tax base?
Q2. Tax payer incurred expenses of SAR 10,000 to alter and improve equipment with a cost base of SAR 100,000. Are these expenses deductible under article 18 of the law? (2.5 marks)
Q3. Tax payer recorded the following journal entry (2.5 marks)
D r. Bad debt expense 10,000
Cr. Provision for doubtful receivable 10,000
Required: Is that provision deductible under article (14) of the law ?
b. 1n 2020
D r. Accounts receivable (Ibrahim) 100,000
Cr. Sales 100,000
D r. Bad debt expense 20,000
Cr. Accounts receivable Ibrahim)
Required: Is that bad debt expense deductible under article (14) of the law?
Q4. In financial accounting tax payers can choose any depreciation rates for depreciable assets ,but when tax payers prepare theie tax base , they must apply depreciation rates according to article (17 ) of the income tax law, So, explain depreciation rates according to article (17) (2.5 marks)