Posted: April 20th, 2015
Each student must select one question from Part A and B. (Two in total)
Part A: (Maximum word limit 500)
Select one of the three questions for Part A
What does tax law mean by derivation?
Explain what the meaning of the word is and how you determine what is the appropriate method taxpayers should use to “derive” their income.
Bob Jane Racing Pty Ltd carries on business as a motor racing promoter and finds that flooding has caused damage to sections of its track. Repair of the track would involve reconstruction of the long straight at a cost of $58,000. The company decided instead to construct a bypass and reduce the length of the track by 300 metres. The bypass was constructed with exactly the same materials as the original track.
The cost of the bypass was $32,000
What amount if any would be allowed as a deduction under section 25-10 of the ITAA 1997?
Would it make any difference if different and more long lasting material was used?
What effect do the words” to the extent that” have in the operation of section 8-1 of the ITAA 1997?
Part B (No word limit)
Choose one question from part B
On 30 June 2015 Shane disposed of the following assets:
(b) Shares in ABC Ltd. The shares were purchased on 20 January 2011 for $30,000 and sold for $50,000.
(d) Shane collects expensive wine as an investment. On 1 January 2011, he purchased a bottle of Grange Hermitage wine at a wine auction for $8,000. He sold it for $12,000.
(e) Shane purchased an old piano at an antique shop for $16,000 on 1 March 2007. The piano was manufactured in 1950. He sold it for $8,000.
(d) A BMW motor car. The car was purchased for $150,000 on 1 July 2004 and sold for $160,000.
Shane has an unused carry forward capital loss from the sale of shares 5 years ago of $40,000. He also has an unused carry forward loss from the sale of a rare coin 3 years ago of $20,000.
Calculate Shane’s net capital gain or net capital loss for the income year ending 30 June 2015.
Students should refer to appropriate provisions of the Income Tax Assessment Act 1997 (Cwth) and the Income Tax Assessment Act 1936 (Cwth).
Neil a director of HRM Pty Ltd, a management consulting company. He has the following questions for you:
The company had the following transactions during the year ended 30 June 2015. How are they treated for income tax purposes by HRM Pty Ltd?
You can assume in this question that the numbers exclude GST unless otherwise stated.
Explain to the company how each of the above items is treated. In your answer please carry out calculations where necessary and also refer to relevant case law and legislation. The company wishes to maximise its tax deductions.
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