country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

Questions:

Dave Solomon is 59 years of age and is planning for his retirement. Following a visit to his financial adviser in March of the current tax year, Dave wants to contribute funds to his personal superannuation fund before 30 June of the current tax year. He has decided to sell the majority of his assets to raise the $1,000,000. He then intends to rent a city apartment and withdraw tax-free amounts from his personal superannuation account once he turns 60 in August of the next year. Dave has provided you with the following details of the assets he has sold:
 
(a) A two-storey residence at St Lucia in which he has lived for the last 30 years. He paid $70,000 to purchase the property and received $850,000 on 27 June of the current tax year, after the real estate agent deducted commissions of $15,000. The residence was originally sold at auction and the buyer placed an $85,000 deposit on the property. Unfortunately, two weeks later the buyer indicated that he did not have sufficient funds to proceed with the purchase, thereby forfeiting his deposit to Dave on 1 May of the current tax year. The real estate agents then negotiated the sale of the residence to another interested party.
 
(b) A painting by Pro Hart that he purchased on 20 September 1985 for $15,000. The painting was sold at auction on 31 May of the current tax year for $125,000.
 
(c) A luxury motor cruiser that he has moored at the Manly Yacht club. He purchased the boat in late 2004 for $110,000. He sold it on 1 June of the current tax year to a local boat broker for $60,000.
 
(d) On 5 June of the current tax year he sold for $80,000 a parcel of shares in a newly listed mining company. He purchased these shares on 10 January of the current tax year for $75,000. He borrowed $70,000 to fund the purchase of these shares and incurred $5,000 in interest on the loan. He also paid $750 in brokerage on the sale of the shares and $250 in stamp duty on the purchase of these shares. Dave has contacted the ATO and they have advised him that the interest on the loan will not be an allowable deduction because the shares are not generating any assessable income.
 
 

Answers:

Part 1:

Facts - The following are the details of Mr. Dave assets:

  • A residential property that is, a house in which he lived for the past thirty years, sold it on the date 27 June, 2016 for $850,000, and the price for which it was bought was 70,000 dollars. The agent charged commission on it for $15,000. The initial buyer forfeited 85,000 dollars to the concerned person Dave since the trade was ended.
  • The painting was bought for $15,000 on 20 September, 1985 and sold for $125,000

Sold Motor Cruiser at $60,000 and the price for which it was bought was 110,000 dollars in 2004

  • The shares of the mining company were advertised for the price of 80,000 dollars and were purchased at $75,000 in the present tax year. The stamp duty on purchase was for $250 and the brokerage cost on sale for $750. The dividends were bought through rented funds for 70,000 dollars and interest was paid on $5000.
  • Capital failure was brought for10,000 dollars.

Issue –

Based on the facts, the issue that arises here, what should be considered as the capital loss or capital gain and what should be done about it.

Relevant Rules and Laws:

Income Tax Assessment Act, 1997

Application:

When the auction earnings are lesser than the base cost of the advantage of capital or while the base cost is fewer than the auction income then a capital loss or capital gain is said to take place (Sharkey, 2015).

According to section 118 of the ITAA 1997, exceptions are given to the person who pays tax in which he is granted the right to relinquish the capital profit on capital benefits sale of amount of insurance, components of PST, superannuation, undertaking capital amounts and main residence (Woellner et al., 2012).

To reduce the gain of capital, indexation and discount are the two methods that are utilized to decrease the capital gain. This is explained in sections 115 and 114 of the Income Tax Assessment Act, 1997. Percentage rate is functional under discounting (Millar, 2016).

  1. When a property has attainment date or transported time to the fresh proprietor of the property on which the date is 20, 1985 September then such as asset is acknowledged as pre capital gain asset plus such an asset is subject to exemption from gain of capital. This is contained in Sections 104 to 110 of the ITAA 1997 (Brown, 2013).

Mr. Dave sold the dwelling home in which he stayed for more than thirty years plus the date of sale is 27/6/2016. The date of attainment if calculated thirty years reverse shall be 27 1986 June. This cannot be pre capital gain asset in addition to consequently shall not be subject to exemption as per sections 104 – 110.  

Capital gain or loss will be = Sale proceeds – Cost base = 850,000 – 70,000

$780,000 is the capital gain

Discounted capital gain = $390,000.

Capital gain = $390,000

Since the asset of capital is a dwelling house therefore, it is subject to exemption as per section 118 of the ITAA. Conclusively, the gain of capital is not chargeable (Sadiq et al., 2016).

  1. The picture of the concerned person Mr. Dave was collected during his lifetime. As per division, 128 – 156 (6) under the Income Tax Act, 1997 painting is collectable (Sawyer, 2015). If the capital loss is from a collectable then the compensation with the assets loss shall be a collectable barely. The value of sale of the picture was 125,000, dollars which was purchased on 20 September, 1985 for 15000 dollars. This is not considered as a pre – capital gain asset. The reason behind this is that the time of attainment was not until 20 September 1985.

Capital gain or capital loss = $sale proceeds – cost base

= $125,000 - $15,000

= $110,000

In this case, the deal is proceeded after September 20, 1999 and the discounting method can be used.

Capital gain discounted = $55,000

Taxable value of capital gain = 55,000. 

  1. In the third case Resources asset is a Motor Cruiser. It was bought in the year 2004 and since it is not a pre capital gain
  2. tax asset it will create the liability of tax on the asset of sale. The cruiser was bought for $110,000 and sold for $60,000

Hence, the capital gain or loss

= $60,000 - $110,000

= $50,000 capital loss

It will be allowed to place off beginning other resources gains or any other sourced income.

  1. Auction of dividends also leads to creation of tax accountability. As per this, the stamp duty and brokerage expenses should be added or deducted from the respective purchase or sale. In the given case study, the dividends are purchased and sold in the similar year; hence, the tax shall be calculated in the given current year, that is, 2016. In this, the capital loss or capital gain shall be allowed. The indexation technique shall not be all owed to deduct the capital gain under section 144 of the ITAA as the asset was detained for additional twelve months. However, the discounting technique can be functional to it (Saad, 2014).

Sale proceeds = Sale price – Brokerage = $80,000 - $750 = $79,250

Purchase price = Cost of acquisition + stamp duty  = $75,000 + $250 = $75,250

Capital gain or capital loss = Sale price – Purchase price = $79,250 - $75,250 = $4000

Reduced capital gain as per discount method @ 50 percent = $2000

Taxable capital gain = $2000

  1. The interest that is obtained from the loan amount shall not be taxable, as it was not utilised to construct any income under ITAA 1997. However, an expense can be subtracted as per section 8 subsection 1 of the Act, if the expense is created out of an income that is generated. In this case, the interest is not utilised to produce any earnings and consequently it is not to be considered as deduction (Saad, 2014).
  2. Total taxable capital gain

Capital gain from residence                                                                                 – Exempted

Capital gain from painting                                                                                         $55,000

Capital loss from motor cruiser                                                                               ($60,000)

Capital gain from shares                                                                                                2,000

Total Capital loss                                                                                                       ($3,000)

Brought forward capital loss                                                                                   ($10,000)

Total capital loss carried forward                                                                            ($13,000)  

 

Conclusion:

On 30th June 2016, there was a capital loss of the price for 3,000 dollars. The carried onward failure from previous year’s loss is10,000 dollars. Mr. Dave must not sell his asset at a enormous loss as no capital profit can be made from it. Capital gain can be achieved from house but that is excused. To hoard tax in the coming years a dwelling house can be bought and investments can be made that are free from tax and easy to avail  (Barkoczy, 2015). 

 

Reference List:

Barkoczy, S., Foundations of Taxation Law 2015, 6th ed. CCH Australia

Brown, C. (2013). Australia-taxation of trusts–the problem of aligning concepts of income. Asia-Pacific Tax Bulletin, 19(5).

Chalmers, J., Carragher, N., Davoren, S., & O’Brien, P. (2013). Real or perceived impediments to minimum pricing of alcohol in Australia: public opinion, the industry and the law. International Journal of Drug Policy, 24(6), 517-523.

Frazier, B. (2013). Resource Capital Fund III LP v. Commissioner of Taxation: Partners or the Partnership-Who Is the Relevant Entity under the Avoidance of Double Taxation Convention between the United States and Australia. Tul. J. Int'l & Comp. L., 22, 377.

Frecknall-Hughes, J., & McKerchar, M. (2013). Historical perspectives on the emergence of the tax profession: Australia and the UK. Austl. Tax F., 28, 275.

Lang, M. (2014). Introduction to the law of double taxation conventions. Linde Verlag GmbH.

Langton, M., & Longbottom, J. (Eds.). (2012). Community futures, legal architecture: foundations for Indigenous peoples in the global mining boom. Routledge.

OR

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2017). Capital Gains Tax Assignment. Retrieved from https://myassignmenthelp.com/free-samples/capital-gains-tax-assignment.

"Capital Gains Tax Assignment." My Assignment Help, 2017, https://myassignmenthelp.com/free-samples/capital-gains-tax-assignment.

My Assignment Help (2017) Capital Gains Tax Assignment [Online]. Available from: https://myassignmenthelp.com/free-samples/capital-gains-tax-assignment
[Accessed 27 January 2020].

My Assignment Help. 'Capital Gains Tax Assignment' (My Assignment Help, 2017) <https://myassignmenthelp.com/free-samples/capital-gains-tax-assignment> accessed 27 January 2020.

My Assignment Help. Capital Gains Tax Assignment [Internet]. My Assignment Help. 2017 [cited 27 January 2020]. Available from: https://myassignmenthelp.com/free-samples/capital-gains-tax-assignment.


For years now, MyAssignmenthelp.com is providing affordable essay help to millions of students worldwide. Our essay assistance services have helped us in assisting students with even the toughest essay assignments. We take pride in the fact that we cater the best assistance to search terms like help me with my essay. We offer affordable services in the fastest way possible. For our fast delivering services, students trust us with their urgent essay assignment needs. Two of our most popular essay writing services are maths essay help and English essay help.

Latest Tax Samples

LAW505-Advise To Amber Of The Taxation Consequences

Download : 0 | Pages : 17
  • Course Code: LAW505
  • University: Charles Sturt University
  • Country: Australia

Answer: 1.Issue: The issue currently on the consequences of the capital gains taxation under the section “104 of ITAA 1997” Laws: According to “section 102-5 of the ITAA 1997”, taxpayer is required to include Capital gains in to the assessable income. . It is very important to understand  that whether there is any CGT event that has occurred with the taxpayer that has initiated the situation of capital gain or l...

Read More arrow

HI6028-Taxation Theory Practice & Law

Download : 0 | Pages : 9

Answer: 1.Based on the given information, the task is to determine the net capital gain or net capital loss of the client for year ended 30 June of the existing tax year. Calculation of capital gains or loss derived from selling of block of land   Pre-CGT assets are those assets which are acquired by the concerned taxpayer earlier than 20 September 1985 and are not taken for the Capital Gain Tax (CGT) under the provision of 149(10) of I...

Read More arrow

BULAW5916-Taxation Law And Practice Case Study

Download : 0 | Pages : 8

Answer: Part 1: In this current study, it is realised that the vital matters are linked with the tax implications and the accounting methods where Frank Lloyd is commencing a business on architect. In the preliminary stage of the business commencement, the garage is considered as the operation station. Frank got a fast reply and a trivial customer base as because of the occupation stipulation and providing accommodation to the native builder....

Read More arrow

BULAW3731 Income Tax Law And Practice

Download : 0 | Pages : 10
  • Course Code: BULAW3731
  • University: Federation University
  • Country: Australia

Answer: Introduction According to section 6-5 of ITAA 1997, the assessable income of an Australian resident should be regarded as taxable in accordance with the ordinary concepts which can be derived from either direct or indirect sources. The sources of ordinary income can be divided into certain categories; such as income from rendering personal services, income from property and the income generated from any business (Gitman et al., 2015)....

Read More arrow

LAW2453 Taxation Advice Helen Maxwell

Download : 0 | Pages : 7

Answer: Introduction Taxation compliance is mandatory in Australia. Failure to comply with taxation laws can lead to penalties or criminal proceeding leading to imprisonment. Taxation in Australia is collected by Australian Taxation Office (ATO) on behalf of the Federal Government. The Australian financial year start on 1st July and ends 30th June next year (Woellner et al., 2010). The Australian taxation law treats residents and fo...

Read More arrow
Next
watch

Save Time & improve Grades

Just share your requirements and get customized solutions on time.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,186,162

Orders

4.9/5

Overall Rating

5,057

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

453 Order Completed

98% Response Time

Howard Asuncion

LLM in Criminal Law

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

647 Order Completed

98% Response Time

Adlina Han

Masters in Marketing with Specialization in Branding

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

154 Order Completed

97% Response Time

Harold Alderete

PhD in Economics

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

2115 Order Completed

97% Response Time

Kimberley Chen

MPA in Accounting

Singapore, Singapore

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

The quality of work was well organized according to the rubrics asked and had all the in-text citations, the way I wanted. Was submitted to me before the deadline. Thanks for the help

flag

User Id: 299002 - 27 Jan 2020

Australia

student rating student rating student rating student rating student rating

It would be better if I receive the same kind of work for all other assignments.

flag

User Id: 254233 - 27 Jan 2020

Australia

student rating student rating student rating student rating student rating

the assessment helper has been very helpfull and i got HD for this assessment. Thankyou my assignment help team

flag

User Id: 323060 - 26 Jan 2020

Australia

student rating student rating student rating student rating student rating

I am excited to get the grades for the paper submitted. I will call on your help again.

flag

User Id: 106921 - 26 Jan 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?