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Taxation Theory And Practice Law: Capital Gain Tax

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Question:

Discuss about the Taxation Theory and Practice Law for Capital Gain Tax.
 
 

Answer:

First Case Study:

Tax Incurred on Capital Gain
A:

Particulars

Amount

Discarding Concern

850,000

Less: Subsidiary Discarding Cost

15,000

Net Discarding Amount

835,000

Deduction:

 

Value as per 30th June

70,000

Present use of charge accustomed by indexation

that is, 1.324 * 70,000

92,680

Taxable capital gain (a – b)

22,680

Any Taxable Gain

 

The Tax that is payable on or prior to 30th June, 2015 @ 25 %

5,670

 B:

Particulars

Amount

Discarding Concern

125,000

Less: Subsidiary Discarding Cost

15,000

Net Discarding Amount

110,000

Deduction:

 

Value as per 20th September, 2016

15,000

Present use of charge accustomed by indexation

that is, 1.324 * 15,000

19,680

Taxable capital gain (a – b)

4,860

Any Taxable Gain

 

The Tax that is payable on or prior to 30th June, 2015 @ 25 %

1,215

C:

Particulars

Amount

Discarding Concern

60,000

Less: Subsidiary Discarding Cost

110,000

Net Discarding Amount

(50,000)

Deduction:

 

Value as per the year 2004

110,000

Present use of charge accustomed by indexation

that is, 7.528 * 50,000

376,400

Net Capital Loss Amount

(266,400)

D:

Particulars

Amount

Net Income

80,000

Deduct: Acquisition Expense

(75,000)

Taxable gain amount

5000

Deductions:

 

Amount of Stamp Duty Paid

(250)

Amount of Rate of Brokerage Paid

(750)

Amount of Interest Paid on Loan

(5000)

Total Amount of Capital Loss Carried Forward

(10,000)

Net Loss Amount

(1000)

Steps to follow if Net Capital is gained:

It has been found that much of the capital losses and capital gains are charged as the net assets gains (Weinzierl 2012). Thus, it can be said that the individual Dave has a taxable capital gain amount by 15 %. The above analysis states that Dave has the capability to earn more from “net capital of long-term in excess of net short-term loss of capital”. This information helps to reach up to the “long-term capital gain”. This is possible due to the addition of the numerous assets and profit amount held by Dave for 1 year. There is another option that Dave can implement and that is following his own retirement he can consider the option of “short-term capital gains and long-term capital gains”.

Generally the deductions take place from the total amount of gain of capital, only when a house property (residential) is traded. Dave is considered as an assessee who transfers the house property, which is considered as a long-term property. The sale of this long-term house property helps Dave to earn an income that is counted as taxable. This particular income is considered as taxable underneath the heading of “income from the house property”. According to this particular act, Dave, the assessee should obtain a new house property for residential use within the agreed time period.

According to the capital gain tax law, the capital assets are equivalent to long term assets. This law also indicates that property is designed as residential house property. It can be both self-occupied and let out property. Under section 22, the capital gained from this income is also taxable as per the law. This case directs Dave should either achieve new house or he should obtain similar assets. These are generally taxable as per section 22 of the law.   

The laws of capital gain tax states that the limitation of time for buying such types of assets if the assets are bought within time period of one year prior or two years after the period of this type of transfer. Meanwhile, this particular law states that the obtained residential possessions are shifted to the period of three years starting from the acquisition date (Weinzierl 2012). In this case, the advantages might get reduced and might be availed prior for revoking. In addition to this, the income that is earned from these acquisition cost regarding new assets are revoked.

The laws of capital gain tax allows the individual Dave for the revocation of the advantage that is perceived from the capital gain tax under the deposits of the account scheme since the year 1988 that is unutilized (Ting 2013). In this circumstance, the amount should be considered as taxable for long-term capital gains. It takes place in the previous year when the time of three years from the expiration of the transfer day.

 

Steps to follow if Net Capital is lost

In the case when the income from the estimated year is inadequate, then it is to be carried forward for setting off the losses for the particular period of time than in the cases loss can be carried forward in order to subsequent estimated year. This occurs since Dave started to incur such losses that cannot be set off (Sowell 2012). Nevertheless, the capital gains tax indicates that every loss cannot be carried forward underneath the profit heads from various sources. Opined to the laws of the capital gain tax, the losses are created from tentative businesses that cannot be set of from gains and incomes from the other occupation than the tentative profession or business.

This particular law states that the highest time of carrying forward these laws is a time period of assessing eight years immediately after following the time period where a loss is occurred. Moreover, it can be said that the particular loss that is generated from the shift of profit or by selling shares can be carried forward and can also be set off beside the gains from the similar head (Rothschild and Scheuer 2014). It is important that for this reason, the gains are composed the amount of profit that is derived from various activities of business but are assessable underneath the profit heading and gains from profession. The income from the transferable shares and dividend are considered as stocks that are taxable underneath the topic of income from income from various sources. However, the generated losses can be set off beside such income.

According to the capital gain tax laws, a set of various probabilities and options and the carry forward of loss is considered as comprehensive shares and reserves occasionally as per the section 73 of the particular laws of tax. It can also be said that finally it was settled or else the real transport of commodity take place. According to the explanation, a part of a business suffers loss due to sales and procurement of shares (Piketty and Saez 2012). This loss should be counted in order to carry forward regarding the speculation business in order to extent the sales and purchase of sales (Melville 2013). The loss took place from cautious transaction treatment can be handled and be carried forward next to the income of the tentative business.    

An individual can use about $ 3000 in order to compensate the income. Here, Dave incurred a loss of $ 1000. This is implemented for balancing the gains from the sale of properties. It can be said that net capital loss cannot be carried forward as no gain might take place from the capital to balance the loss (Piketty and Saez 2012).

Second Case Study:

A: [F.B.T Payable = Purchase Price*Statutory rate*Gross up Factor*F.B.T]

Vehicle Cost

Distance Travelled

Rate of Statutory charges

GST Payable

FBT rate

Net amount of  payable FBT

$ 33000

$ 10000

26 %

2.0802

47 %

6452

Workings = (33,000*26%*2.0802*47%)

Taxable Value = [Interest calculated at benchmark – Actual Interest – Employee Contribution – Other Deductible Amount]

Taxable Amount

Calculation of Interest based on Bench Mark * 5.95 %

Actual interest * gross value

500,000

29.750

1324

 

Particulars

Amount

Discarding Concern

2,600

less: Achievement Cost

1300

Net Amount of Disposal

1300

B:

The borrowed loan is used for purchasing the shares that could be beneficial for Emma instead of providing the particular amount to her husband. This might help Emma in order to raise the income from dividend and wealth for the long-term period as the stock price rises in the period (Boadway 2012). It has been found that if Emma invests equivalent to loan amount in stocks, this might provide higher yield of dividend and this will make Emma enable to generate faster income.

As per the law, indexation has the benefit of availing such shares from the allocation date (Berman 2013). The fringe benefit of tax is the occurrence that is applied when the staffs are under the irreversible trust by way of transferring the gift from the date of cost of achievement. The fair market value is suitable for Emma as she has selected the option of changing her shares to her spouse.

 

References

Berman, E. (2013). Predation, taxation, investment and violence. Cambridge, Mass.: National Bureau of Economic Research.

Boadway, R. (2012). From optimal tax theory to tax policy. Cambridge, Mass.: MIT Press.

Melville, A. (2013). Taxation. Harlow: Pearson.

Piketty, T. and Saez, E. (2012). A theory of optimal capital taxation. Cambridge, Mass.: National Bureau of Economic Research.

Piketty, T. and Saez, E. (2012). A theory of optimal inheritance taxation. London: Centre for Economic Policy Research.

Rothschild, C. and Scheuer, F. (2014). A theory of income taxation under multidimensional skill heterogeneity. Cambridge, Mass.: National Bureau of Economic Research.

Sowell, T. (2012). Trickle down theory and tax cuts for the rich. Stanford, Calif.: Hoover Institution Press.

Ting, A. (2013). The taxation of corporate groups under consolidation. Cambridge [UK]: Cambridge University Press.

Weinzierl, M. (2012). The promise of positive optimal taxation. Cambridge, Mass.: National Bureau of Economic Research.

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