Taxation Law and Practice Assignment -
Team-based CGT problem and depreciation problem Australian Tax 2018.
Set out your CGT answer following the 7 steps as per lecture example. Provide a legal analysis.
Step 1: Residence.
Step 2: Must have a CGT event.
Step 3: Identify the CGT asset.
Step 4: Is the CGT event/ CGT asset exempt?
Step 5: Do the special CGT rule apply?
Step 6: Calculating the capital gain/loss.
Step 7: Netting capital gains/ losses.
Question 1 - Tom's depreciation schedule for the year ended 30 June is set out below. All assets have a 100 per cent business use and he uses the diminishing value method. All values exclude GST. All depreciating assets were acquired after 10 May 2006.
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DEPRECIATING
ASSET
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OPENING ADJUSTABLE VALUE 1 JULY $
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DEP'N RATE %
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ADDITIONS $
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TERMINATION VALUE $
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DEDUCTION $
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CLOSING ADJUSTABLE VALUE 30 JUNE $
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Fences
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12,608
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Cattle yard (permanent)
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23,890
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Total
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Additionally, on 1 July of the current tax year, he purchased a new barbed wire fence for $55,000, as the old barbed wire fence was in need of fixing up. He scrapped the old fence on 1 August when the new fence was installed. All values exclude GST.
Provide a depreciation schedule for the income tax year ended 30 June for all depreciating assets in this part. Include reasons for the amounts included/excluded from the depreciation schedule. Provide full details of Sections, cases, commentaries and ATO rulings where applicable.
(Note: Provide headings for each item.)
Question 2 - Tom's CGT transactions were as follows.
a. He sold shares for $100,000 on 30 June of the current tax year. The shares cost $50,000 on 23 July 1989.
b. On 1 July, a piece of artwork worth $10,000 was stolen from his house. The painting was a gift from a friend and it was worth $7000 when it was gifted on 1 September 1998. It was not insured.
c. He acquired a house for $400,000 for rental. Other costs were stamp duty of $23,000 and the legal costs to purchase of $2000.The contract was dated 1 March 1992 and all costs were paid on 31 March 1992.
His costs of holding the house included interest of $70,000 and repairs of $63,000. The house was not eligible for capital allowance deductions.
An $11,000 cost of a new shed was incurred on 2 May 1998. There were Sl0O'j of capital allowance deductions for the shed.
On 31 December, he sold the house for a contract price of $800,000. His advertising costs on sale were $3000 and the sales commission was $29,000.
Calculate the capital gain or loss (if applicable) under the ITAA 1997 for the above CGT transactions. Provide a legal analysis for each step for each event. Then calculate the net capital gain or loss (step 7 of CGT).
Attachment:- Assignment Details.rar