Assume Secha Trading Share Company has a business building which has 100 equal size rooms each to be let out at Br 5,000 per month. During tax year 2020, 30 rooms were vacant for 6 months. The share company incurred the following expenses during the tax year: maintenance expense of Br 50,000; land and building tax of Br 10,000; advertising expense of Br 21,000; annual land lease cost of Br 100,000; other deductible expenses of Br 65,000. The building was constructed at Br 12,000,000 and it is not fully depreciated during tax year 2010.

Question

Assume Secha Trading Share Company has a business building which has 100 equal size rooms each to be let out at Br 5,000 per month.  During tax year 2020, 30 rooms were vacant for 6 months. The share company incurred the following expenses during the tax year: maintenance expense of Br 50,000; land and building tax of Br 10,000; advertising expense of Br 21,000; annual land lease cost of Br 100,000; other deductible expenses of Br 65,000. The building was constructed at Br 12,000,000 and it is not fully depreciated during tax year 2010.
Required: Compute
The amount of gross rental income for the tax year ending June 30, 2010
The taxable rental income for the tax year
The amount of rental income tax for the tax year

GPT-4o mini · Answer

To calculate the gross rental income, taxable rental income, and rental income tax for Secha Trading Share Company for the tax year ending June 30, 2010, we'll follow these steps:

1. Calculate Gross Rental Income

Total rooms: 100
Rooms rented out: \(100 - 30 = 70\)
Monthly rent per room: Br 5,000

To find out how many months each rented room contributes to rent:

Rented for 6 months (since 30 rooms were vacant for 6 months).
Rented for 12 months (since 70 rooms were occupied for the full 12 months).

Calculating the total rental income:

For the 70 rented rooms:
- Income for 12 months = \(70 \text{ rooms} \times Br 5,000 \text{ per room} \times 12 \text{ months} = Br 4,200,000\)
For the 30 vacant rooms:
- Income for 6 months (no contribution as they were vacant for 6 months)

Thus, the Gross Rental Income = Income from rented rooms
Gross Rental Income = Br 4,200,000

2. Calculate Taxable Rental Income

Total expenses incurred:

Maintenance expense = Br 50,000
Land and building tax = Br 10,000
Advertising expense = Br 21,000
Annual land lease cost = Br 100,000
Other deductible expenses = Br 65,000

Total deductible expenses = Br 50,000 + Br 10,000 + Br 21,000 + Br 100,000 + Br 65,000 = Br 246,000

Next, we will calculate the Taxable Rental Income:
Taxable Rental Income = Gross Rental Income - Total Deductible Expenses
Taxable Rental Income = Br 4,200,000 - Br 246,000 = Br 3,954,000

3. Calculate Rental Income Tax

Assuming the tax rate for rental income is a flat rate or according to a certain structure (not provided in your request).

Since no tax rate has been specified in your request, we'll consider a hypothetical rental income tax rate of \(15%\) (typically used in many regions for illustrative purposes).

Rental Income Tax = Taxable Rental Income × Tax Rate
Rental Income Tax = Br 3,954,000 × 15% = Br 593,100

Summary of Calculated Values:

Gross Rental Income: Br 4,200,000
Taxable Rental Income: Br 3,954,000
Rental Income Tax (at 15%): Br 593,100

If you have specific tax rates or rules to follow, please provide them for accurate calculations!