QUESTION 1

There are two certainties in life of which one is taxation. Tax plays a vital role in any country and the economy. Please deliver a 5-minute speech in English to the students of your university, convincing them on what taxation can do for the nation - the people, the government and the economy.

QUESTION 2

Hanson Him, an established film producer has recently retired from his hectic film production job at the age of 50. He has always regarded you as his trusted tax advisor and recently engaged your firm to look into his family's business affairs. He has requested for your expert advice on the relevant ideas to optimize his family's tax position. You have gathered the following information during your recent discussion with Hanson and his family.

Hanson Him

- As a gratitude for the excellent service during his tenure with the film production company, he received a lump sum gratuity payment of RM200,000 upon his early retirement at the age of 50 in January 2012.

- Since young, Hanson has always been fascinated with magic and has often tested out his tricks with his children and friends at parties and casual gathering. Since retirement and having lots of spare time, he started performing at children charity functions and private business gatherings for small fee of RM 200 per performance as he do not regard himself as an expert magician.

- He has no fix business but would gladly take up any offer for his amateur magician services. He feels he is doing this on a voluntary basis instead as a profession. In the last few months he has invested in a few magic tools and materials. His wife or daughter would often assist him in some of his bigger shows

- Over the last 2 years, he has invested in several properties as follows:

(i) A studio apartment in Mont Kiara
(ii) 2 shoplots in Ara Damansara
(iii) A semi-detached house in Setia Alam

All the properties fetch good rentals and provide a steady stream of return for his retirement years . When the price is right depending on the market conditions, he intends to sell some of the properties or acquire more.

Hanson's wife - Juliana Kaur

- Once a season actress, now a retired housewife and an experienced baker. Her friends loves her baking and they have often placed orders for her famous durian cheese cakes. She has become a popular durian cheese cake supplier for social gatherings organized by the woman association which takes place almost every quarter. Juliana handmade cake is priced at RM100.

- With her established network of contacts and social standing, Juliana has also built up a special reputation for her matching skill in Malaysia, Singapore and India. Many of her friends and acquaintances will give her tokens in the form of angpows or gifts for her successful recommendations.

Hanson is also unclear the Income Tax Act with regards to chargeable income and came across the article below and has asked for your explanation with regards to it.

"The Income Tax Act (ITA) levies taxes on the chargeable income of an individual from all sources. To arrive at the chargeable income the ITA has in its provisions detailed the steps to be taken and to be strictly followed. The various steps that an individual has to take to arrive at the chargeable income commences from the gross income stage. At each stage expenses, allowances, deductions etc can be claimed. There are stages where current business loss and business loss brought forward are set off."

REQUIRED:

Write a report to Hanson based on the information above. Your report should include the chargablilty of Hanson and his wife Juliana Kaur. You are also required to explain in your report the each stages taken to obtain the chargeable income. You should use the information given for Hanson and his wife to display your stages in the tax computation.