Mr. Anania Tajiri is a prominent businessman owning several residential houses located in upmarket areas, Commencing 1 February 2008, he rented out three of his...

      

Mr. Anania Tajiri is a prominent businessman owning several residential houses located in upmarket areas, Commencing 1 February 2008, he rented out three of his houses at a monthly rental of Sh.85,000 each. The tenants were required to pay a three months deposit before occupying the houses
The following expenses were incurred by Mr. Tajiri in February 2008:
- Furnishing of the houses - Sh.200,000 per house.
- Legal fees for drawing rental agreements - Sh.13.000 per agreement Valuation fee for the three houses - Sh.33,000.
- Insurance premium for the three houses for the period I February 2008 to 31 January 2009 – Sh60,000

The insurance policy for the houses was renewed on 1 February 2009 at the same rate and terms

Mr. Tajiri has provided the following additional information for years 1008 and 2009:
1. Land rates paid for 2008 amounted to Sh. 150,000 while for 2009 the amount paid was Sh.165,000
2. The cost of garbage collection per house was Sh.250 for each month that the house was occupied. The rental agreement provided that the landlord was responsible for paying this amount to the garbage collection company.
3. The three houses were served by three watchmen and one gardener who were each paid Sh.5,500 per month by the landlord This amount was increased by 11% with effect from 1 May 2009 following a directive by the government en minimum wage levels.
4. The rent for each month was collected by an estate agent on behalf of the landlord. The estate agent charged a fee equivalent to 2.5% of the rent collected.
5. Interest charged on a loan used to develop the three house amounted to Sh.660,000 in 2008 and Sh624,000 in 2009.
6. In December 2008, the- landlord repainted the houses at a cost of Sh.60,000 and repaired a side road leading to the houses at a cost of Sh. 100,000.
7. The Landlord bas signed contract with a local firm of architects and engineers for inspection of his properties in December of each year. The annual inspection fee charged by the firm for the three houses is Sh15,000.
8. In March 2009, Sh.160,000 was incurred by the landlord to repair a leaking roof in one of the houses.
9. In April 2009, one of the tenants passed away. The tenant had rent arrears of four months, including April 2009, which the landlord partially set-off against the three- months deposit paid by the tenant. The balance of the debt was written off as unrecoverable. The house remained vacant until a new tenant moved in on 1 June 2009. The monthly rent (for the new tenant only) was increased to Sh.90,000. The landlord spent Sh.14,000 as legal fees in relation to a rental agreement with the new tenant.
10. In August 2009, the landlord spent Sh.8,500 in erecting a signboard at the junction of the side road leading to the houses and tile main road.
11. In November 2009, the landlord completed the construction of a common swimming pool for the three tenants at a cost of Sh.2,000,000. He agreed with the tenant, that the rent for each house would be increased by Sh.l5,000 per month with effect from December 2009 in view of the additional facility.

Determine Taxable rental income of Mr. Anania Tajiri for the years ended 31 December 2008 and 31 December 2009.
Assume that the watchmen and gardener are not allocated to a particular house but serve the three houses as a unit.

  

Answers

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Wilfykil answered the question on February 15, 2019 at 10:50

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