TAXATION LAW ASSIGNMENT -
QUESTION 1 -
On 1 January 1987, Jack purchased 1000 shares in ABC Ltd for $1.40 each and 10000 shares in XYZ Ltd for $2 each with the intention to hold them as an investment. At the same time Jack also purchased an investment property for $250,000 and a boat for $11,000.
On 15 August 2016, Jack sold the shares in ABC Ltd for 70c each, the boat for $10,000 and the investment property for $650,000. Total depreciation and insurance costs in respect to the investment property were $40,000. Jack also paid interest of $70,000 on the mortgage he had taken out in respect of the investment property.
For the year ended 30 June 2017 Jack was paid a salary of $120,000 and received rent from the investment property of $3,000.
On 20 December 2017, Jack sold the XYZ shares for $6.50 each. He paid brokerage fee of $4,000 in respect of the sale. His only other income for year ended 30 June 2018 was a salary of $130,000.
What is Jack's assessable income and tax liability for years ended 30 June 2017 and 30 June 2018?
QUESTION 2 - Principles and Concepts
Faced with financial difficulties, Ardmono Pty Ltd, a manufacturer of the highly reputable Sunrace brand of car alternators, entered into an agreement on 1 July 2017 with Hunda, a car-maker, to sell its entire business for $30 million. However, the taxpayer did not proceed with the sale and instead entered into a different agreement to sell the exclusive rights to use the Sunrace brand trademark to Huyndai for a lump sum of $4 million.
With reference to legislation and case law, advise Ardmono Pty Ltd whether the $4 million constitutes assessable income. Ignore capital gains tax implications.