Reference no: EM132724685

Question - Livestock and produce: Ring-fencing provision

A farmer had the following livestock on hand at the beginning of the year of assessment.

R

10 bulls at standard value R50 each 500

25 oxen at standard value R40 each 1 000

1 200 cows at standard value R40 each 48 000

600 tollies and heifers at standard value R30 each 18 000

140 calves at standard value R4 each 560

Total=68 060

He bought a further 300 cows during the year at a cost of R220 000. He derived an income from farming operations (before the deduction of any expenditure) of R550 000 during the year. He had the following livestock on hand at the end of the year of assessment:

9 bulls at standard value R50 each 450

23 oxen at standard value R40 each 920

1 400 cows at standard value R40 each 56 000

500 tollies and heifers at standard value R30 each 15 000

220 calves at standard value R4 each 880

Total = 73 250

All the livestock bought during the year was still on hand at the end of the year. The market value of the livestock on hand at the end of the year of assessment was R1 million.

Required - Calculate the deduction that will be allowed under s 11(a) for the cows bought during the year of assessment.