Jenny has been transferred to the Tax Department of her company as the company’s Tax Accountant: Tax Management Case Study, SP

Jenny has been transferred to the Tax Department of her company as the company’s Tax Accountant. Shortly after she joined her new department, she received a Notice of Additional Assessment for year of assessment 2016 dated 20 March 2017 and the amount of additional tax payable on the Notice was $120,000 which was still unpaid.

Upon verification of the Notice against the company’s detailed tax computation for the year of assessment 2016, Jenny noticed that IRAS had treated the gain of $800,000 from the sale of a shophouse as short-term and trading in nature, and brought the gain to tax resulting in the additional tax payable of $120,000. The company, on the other hand, had treated the gain from the sale of the shophouse as capital gain and not taxable in its detailed tax computation previously submitted.

The shophouse was purchased on 30 August 2013 and it was sold on 30 June 2015. A check with the management showed that the company purchased the shophouse with the intention to expand the company’s sales and marketing space. However, as the company did not perform well in the year 2015, it needed to streamline its operations and free up funds to turn around the company. Hence, the management took the decision to sell the shophouse on 30 June 2015.

Based on the company’s records, there was no other property transaction carried out by the company since its incorporation.

Part 1:
Research and advise on the objection and appeal process, in accordance with the IRAS’ administrative procedures, in the event that the company disagrees with the IRAS’ tax assessment. All relevant deadlines and filing requirements in accordance with the IRAS’ administrative procedures must be clearly stated where applicable.

Part 2:
Recommend the appropriate action to be taken in terms of payment of the additional tax assessed and objection to the assessment. Suggest the use of appropriate documents to support your case, and all reasonable grounds of objection must be clearly stated where applicable.

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