Reference no: EM132616301

Mr. Hesabu has recently opened all Income Tax Consultancy office in Nairobi. He has been approached by his clients on the following matters.

(i) M/S Watu, Wote, Wao are three partners operating WWW Enterprises. In 2019, they made profits of Sh.180,000. They share profits in the ratio 3:3:4. Wao had overdrawn on his account and was charged Sh.30,000 interest. Watu and Wote received interest of Sh.25,000 each from the partnership. The interest account is included in the above profits. Mr. Wote wishes to know how much tax he would pay. He has no other source of income.

(ii) Live Well Foundation is a Non-Governmental Organisation formed for the purposes of addressing people's spiritual needs. It will derive its income from donations of all kinds, charitable walks and sale of religious literature. They wish to know if they will be required to pay any tax.

(iii) Mrs. Mjini is a happily married housewife residing in Kilimani Estate, Nairobi. Since her compound is big she engages in backyard gardening during her spare time and she derives a lot of satisfaction from it. She also maintains very accurate records of the performance of her garden. Details for the three years ending 31 December 2019 are as follows:

Year ended 31 December 2017 Profit Sh.20,000

Year ended 31 December 2018 Loss Sh.40,000

Year ended 31 December 2019 Profit Sh.50,000

Garden produce consumed by Mrs., Mjini's family during the year of income 2019 was sh.60,000 (not included in the above results).

She wishes to know how much tax she should pay from this activity in 2019.

(iv) New Plastic Limited, manufacturers of plastic products wishes to sponsor research into plants that may produce plastics related materials. They have set aside Sh.20,000,000 which will be awarded to the Department of Biochemistry, Ubora Science University. They wish to know if there is any tax advantage which may arise.

Required:

Problem 1: As Mr. Hesabu's tax manager, indicate down a memorandum on each of the points for his consideration.