Personal Income Tax Deductible Expenses Quiz
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Questions and Answers

Which test is used to distinguish between personal and business expenditures for tax purposes?

  • Enduring Benefit test
  • Business Entity test (correct)
  • Identifiable Asset test
  • Once and For All test

    • What is the primary criterion for an expense to qualify as deductible under Section 33(1)?

  • Incurred without any personal benefit
  • Incurred in non-revenue generating activities
  • Incurred solely for entertainment purposes
  • Incurred in the production of gross income (correct)

    • Which type of expense is typically considered non-deductible under Section 33(1)?

  • Marketing and advertising costs
  • Office supply purchases
  • Business-related travel expenses
  • Entertainment expenses (correct)

    • What distinguishes the 'Enduring Benefit' test from the 'Once and For All' test?

    <p>Duration of benefit (A)</p> Signup and view all the answers

    Which section of the tax code specifically allows for deductions against particular sources of income?

    <p>Section 33(1) (A)</p> Signup and view all the answers

    Which of the following expenses would typically qualify as a deduction when computing chargeable income?

    <p>Expenses related to foreign exchange losses (D)</p> Signup and view all the answers

    What must be established before calculating chargeable income from a business source?

    <p>The basis period for the source (D)</p> Signup and view all the answers

    Which section covers the computation of statutory income from each source?

    <p>S.42 (B)</p> Signup and view all the answers

    What is the first step in determining chargeable income?

    <p>Ascertain basis period for each source (B)</p> Signup and view all the answers

    Which expense generally does not qualify for deductible treatment?

    <p>Costs for personal family activities (D)</p> Signup and view all the answers

    What section deals specifically with the treatment of trading stock?

    <p>S.35 (A)</p> Signup and view all the answers

    Which of the following would likely not be listed as an allowable expenditure?

    <p>Interest received on fixed deposits (B)</p> Signup and view all the answers

    Which document would provide detailed insights into deductible expenditures?

    <p>Tax code sections related to income (A)</p> Signup and view all the answers

    What is the purpose of computing adjusted income from each source?

    <p>To calculate chargeable income accurately (A)</p> Signup and view all the answers

    Which of the following expenses would likely meet the criteria for deductibility?

    <p>Costs associated with your home office (C)</p> Signup and view all the answers

    Which of the following is a criterion for the deductibility of expenses from gross income?

    <p>Expenses must be directly related to the production of income. (A)</p> Signup and view all the answers

    Which section of the tax code addresses the treatment of specific deductions disallowed?

    <p>S35 (B)</p> Signup and view all the answers

    What happens to adjusted income if the value of stock at the end of the period exceeds that at the beginning?

    <p>Adjusted income increases by that excess. (B)</p> Signup and view all the answers

    Which of the following is an example of allowable expenditure under double deductions?

    <p>Insurance Premiums on Export of Cargo. (D)</p> Signup and view all the answers

    Which section covers double deductions in respect of cash contributions?

    <p>S34B (D)</p> Signup and view all the answers

    Which of the following would NOT be considered stock in trade?

    <p>Personal items for resale. (C)</p> Signup and view all the answers

    What type of expenses can be accounted for under PR No. 4/2006 regarding stock valuation?

    <p>Valuation of stock in trade and work-in-progress. (A)</p> Signup and view all the answers

    Which of the following expenditures is NOT mentioned as an example of deductions?

    <p>Interest on personal loans. (A)</p> Signup and view all the answers

    Flashcards

    Deductible Expenses (Section 33(1))

    Expenses directly related to producing income.

    Non-deductible Expenses (Section 33(1))

    Expenses not connected to producing income, for example, personal use.

    Capital vs. Revenue Expenses

    Determines if an expenditure creates an asset or is an ongoing business cost.

    Identifiable Asset Test

    Examines whether an asset is distinct, measurable and separate from the business.

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    Enduring Benefit Test

    Checks if an expenditure generates ongoing benefits to the business (not just one-time).

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    Deductible Expenses

    Expenses that can be subtracted from gross income to arrive at adjusted income.

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    Gross Income

    Total income before any deductions.

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    Adjusted Income

    Gross income minus allowable deductions.

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    Chargeable Income

    Income liable for tax after deductions and adjustments.

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    Basis Period

    The period of time used to calculate income from a source.

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    Statutory Income

    Income determined in accordance with the tax laws.

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    Aggregate Income

    The total income from all sources.

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    Total Income

    Total income after combining all income sources.

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    Business Source Deductible Expenses

    Allowable expenses from running a business that reduce the business income.

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    Section 33

    The general rule for deductions in personal income tax.

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    Deductible Expenses (S33)

    Expenses that are allowed to be subtracted from your gross income to determine your taxable income.

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    Non-deductible Expenses (S33)

    Expenses that are not allowed to be subtracted from your gross income. These are often personal expenses not related to your business.

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    Expenditure Specifically Disallowed (S39)

    Certain types of expenses that are specifically prohibited from being deducted from your income, listed in a separate law.

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    Specific Deductions (S34)

    A section in the law that lists particular types of expenses that can be deducted from your income.

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    Treatment of Trading Stock (S35)

    Special rules about how the value of your inventory (raw materials, goods in production, finished goods) is accounted for when calculating your income.

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    Value of Trading Stock: End of Period vs. Beginning

    If your inventory value is higher at the end of a period than the beginning, it increases your income. If it's lower, it decreases your income.

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    Double Deductions (Examples)

    Certain expenses that are allowed to be deducted twice, offering a tax advantage.

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    Halal Certification and Research Expenditures (Double Deduction)

    Two examples of expenses that can be deducted twice: costs for Halal certification and expenses related to research.

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    Study Notes

    Personal Income Tax Deductible Expenses

    • Deductible expenses are items subtracted from gross income to arrive at adjusted income.
    • Items considered as gross income need to be ascertained.
    • Deductions are essential to arrive at adjusted income.

    Steps to Calculate Chargeable Income

    • Ascertain the basis period for each source (sections 20 & 21).
    • Ascertain gross income from each source for the basis period (sections 22 & 32).
    • Compute adjusted income from each source/adjusted loss for business source (sections 33 to 41).
    • Compute statutory income from each source (section 42).
    • Compute aggregate income (section 43).
    • Compute total income (section 44).
    • Compute chargeable income (sections 45 & 51).

    Sukaneka Sdn Bhd Tax Computation (2021)

    • Provided data on business source deductions (slow-moving inventories, depreciation, interest, bad debts, tax filing fees, foreign exchange loss, and others).
    • The adjusted income for Sukaneka Sdn Bhd in 2021 was RM1,511,000.

    Legislative Provisions (Sections 33, 39, 34, and 35)

    • Section 33: General rule for deductions from gross income.
    • Section 39: Expenditure specifically disallowed.
    • Section 34: Specific deductions (including those for revenue expenditure, double deduction for cash contributions, deduction of expenses on discount or premium, and expenditure on treasury shares).
    • Section 35: Treatment of trading stock.

    Tests for Granting Deductions

    • Is the expenditure of a revenue or capital nature?
    • Is the expenditure in relation to the taxpayer's business activities?
    • Is the expenditure authorized or prohibited by the Act?
    • Is the expenditure for the relevant year?
    • Is the expenditure wholly and exclusively for the production of gross income?

    Deductible Expenses: General Framework

    • Expenditure has been made or is due.
    • Is it disallowed by the Act?
    • Is it specifically authorized by the Act?
    • Is it of a revenue nature?
    • Is it remotely connected with the source?
    • Is it wholly and exclusively incurred in the production of income?

    Capital and Revenue Expenditure

    • Immaterial Considerations: Lump sum vs. periodic payments; reasonableness/magnitude of expenditure; character of receipt; payment from capital funds; accounting treatment.
    • "Once and For All" Test: Recurring expense (revenue outlay) vs. one-time payment (capital outlay).
    • "Enduring Benefit" Test: Expenditure to acquire a source of income/capital asset; bringing into existence for enduring benefit.
    • Identifiable Asset Test: Whether an asset of a capital nature has been acquired.
    • Fixed Versus Circulating Capital: Relates to fixed/circulating capital; purpose of maintaining capital assets; interest on loans for fixed assets.
    • Business Entity Test: Distinction between business structure and business process; acquisition of means of production; establishment/expansion of business; sustained effort in business.

    Other Deductions

    • Listed various specific deductible expenses such as donations, training, promotion expenses, costs related to certain business activities, etc.
    • Examples of deductions across a range of activities.

    Stock in Trade

    • Stock in trade includes raw materials, work-in-progress, and finished goods.
    • Value of stock at the end of the period vs beginning. Excess value adjustment for determining adjusted income.
    • Important for valuation of stock.

    Double Deductions

    • Detailed different types of double deductions.

    Bad and Doubtful Debts

    • Methods of handling bad and doubtful debts in the accounting entries.
    • Detailed examples to illustrate the relevant adjustments.

    Pre-Commencement and Other Expenses

    • Examples of various pre-commencement expenses and other relevant expense types.

    Lease Rentals

    • Deductible expenses related to private motor vehicle rentals.
    • Restrictions based on vehicle newness and cost.
    • Excluded commercial vehicles.
    • Examples provided for illustrative purposes.

    Entertainment Expenses

    • Entertainment provided to employees and in business activities are outlined.
    • Specific expenses for sales promotions are detailed.

    Interest Example

    • Sample interest calculations for different months are shown
    • Specific example calculations.

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    Related Documents

    Allowable Expenditure PDF

    Description

    Test your knowledge on personal income tax deductible expenses and the steps to calculate chargeable income. This quiz covers essential deductions and computation methods relevant to tax assessment. Perfect for students and professionals keen on mastering tax calculations.

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