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ACCT420 Sections 1 and 2, Spring 2025

(Please do the following question by handwriting and submit the assignment on 25 Feb 2025

Individual Assignment 1 – Property tax computation

Dickson Lee owns a residential property in North Point which was let to Mr. Xi on the following terms:

(i)    Lease term: two years from July 2022 to June 2024.

(ii)   Rent: $22,500 per month payable on the first day of each month

(iii)  Rental deposit: $45,000 payable on signing the lease agreement. This could be used to offset the rent long overdue by the tenant.

(iv)  Rates of $3,780 per quarter were payable by the owner.

(v)   The building management fee of $1,000 per month was payable by the owner during the lease period.

Mr. Xi determined to end the lease agreement at the end of June 2023, this was accepted by Lee. Lee repossessed the property and spent $30,000 on renovation. It was let to Mr. Yan on the following terms:

(i)    Lease term: Four years from 1 October 2023 to 30 September 2027.

(ii)   One-month rental free period: October 2023.

(iii)  Rent: $21,600 per month payable on the first day of each month.

(iv)  Rental deposit: $43,200 payable on signing the lease agreement.  This could be used to offset the rent long overdue by the tenant.

(v)   Lease premium: $18,000 payable on signing the lease agreement by the tenant.

(vi)  Rates: $3,780 per quarter payable by Yan.

(vii) The lease agreement includes the terms that the building management fee and rates payable by Yan. Assume the rate is $3,780 per quarter and management fee $1,000 per month during the lease period.

(viii) Yan paid $4,780 by himself for refurbishment of the kitchen with the permission of the owner. The cost was borne by Yan.

The owner has a mortgage loan with a commercial bank to finance the acquisition of the North Point property. During the years 2022/23 and 2023/24, he has paid interest amounting to $36,000 and $24,000 respectively.

Required:

A) Compute Dickson Lee’s property tax liability for the year of assessment 2022/23 and 2023/24.

B) Assume Lee is a HK resident, single and has no dependent and no other chargeable income.

Assume Lee elects personal assessment, compute his tax charges for each of the years 2022/23 and 2023/24.