- 10 Marks
AT – Nov 2023 – L3 – Q5c – Tax planning
Explain the residual deduction rule and state four conditions under which repairs and improvements are considered allowable deductions.
Question
Repairs and improvements are not mutually exclusive in tax administration because one leads to the other, and one cannot happen without the other. The Commissioner-General ensures that certain conditions are met before an amount of repairs and improvements is taken as an allowable deduction under the deductibility principles in tax administration.
You are the Tax Manager for Akwaaba and Associates, a firm of tax consultants. The Finance Manager of APC Ltd, a client of your firm, is contemplating how to treat major repair works being undertaken on their warehouse.
Required:
Write a memo to the Finance Manager of APC Ltd explaining what constitutes the residual deduction rule and state FOUR (4) conditions under which repairs and improvements are considered allowable deductions. (10 marks)
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