Posted: September 8th, 2015
Fast Ed is the owner of a new and second hand car business. He is really good at
wheeling and dealing in the car selling business but is not very good at
understanding the tax effect of some of his deals. Explain the tax effect of the
following activities. (Each subsection is worth 3 marks.)
value them or if he has different valuation options available. Explain in your
own words the options Fast Ed has available to value his stock.
given in exchange for a debt of $18,000 Fast Ed owed to Slick Sam. The car
cost Fast Ed $17,000 and was on the showroom floor for sale for $19,000.
his daughter who now uses it everyday. He decides he is not going to sell this
car and keep it for use in the family. He purchased the car for $19,000 and it
could have been sold for $21,000
Ford had just announced a new model hatchback and it has great reviews.
He was really concerned that customers would not consider buying the older
models if he did not drastically reduce the selling price. Other dealers have
told him they were ‘not moving’. The Ford hatchback had cost $22,000 and
was originally selling for $28,000. At the 30 June Fast Ed had 3 in stock.
Various taxpayers receive the following amounts during the 2014/15 income tax year:
to Sydney for work. The employee bought a return ticket on sale for only $120
and stayed with a friend while in Sydney. One of the conditions of the work
related trip was that the employee could keep whatever remained of the $500
as long as the work required to be performed in Sydney was completed.
in a car accident.
still owns the share but it is now trading at $7.50
and makes $10,000 during the tax year.
Discuss the assessability or not of the above amounts. Each amount discussed is
Briefly explain in your own words what a progressive tax rate
Charles is an accountant and is keen to become a partner in one of the big
international accounting firms. In order to do so he knows that he needs to gain some
international experience. He secures a position with another large accounting firm in
the US with a contract for 18 months. He sells his apartment in August 2014 in
Sydney and buys a similar apartment a few weeks later in New York. He joins the
local gym and rugby team. He volunteers at the Lyons Club on weekends. He has
one brother that lives in the UK and his parents have already passed away. Charles
is not married and has no children. At the end of the 18-month contract, Charles
decides he would like to gain a little more experience and extends his contract
another 12 months.
With regards to the Domicile test, would Charles be considered a resident or not of
Australia for the 2014/15 income tax year? Discuss the factors the ATO would
consider in making their decision.
wants to try out the boat first. On the 1 January 2015 Jim agrees to hire the
boat to Ben and the agreement provides that Ben will buy the boat at the end
of three years unless Ben decides to buy the boat sooner. Josh agrees that, if
Ben does buy it, Josh will apply the hire fees against the agreed purchase
price. Some months later, Ben inherits some money and advises Josh he
would like to buy the boat. The sale is concluded on the 1 June 2015.
2015 the asset is destroyed by fire. The asset was not insured.
of June 2015 Joe grants Ashleigh the option to purchase his beach
house in Byron Bay. Ashleigh pays $2,000 for the option.
rented out between 1 July 2009 and 30 June 2010. From 1 July 2010, he
used the property for his main residence until it was sold on the 30 June 2015
for $400,000. (Calculations to be performed in years and not days.)
the separate garage into an office for his financial planning business and
commences business. The garage comprises 20% of the floor space of the
home. He sells the property in December 2014 for $700,000. The market
value of the house in March 2008, when the garage was converted for
income producing use was $500,000.
With reference to each of the above situations, outline the Capital Gains Tax
consequences of the transactions.
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