Required a plagiarism report for this assignment.Answers must be as instructed below.
Length: 3,500 words (Excluding calculations and footnotes/endnotes)
This assignment consists of three (3) case studies. You must complete all the case studies and all parts of each case study. Support all your discussion and analysis with references to any relevant authority.
Case Study One
Part A
Elizabeth was born in 1982 and qualified as an accountant in 2004. Elizabeth is married to Tom and they have three children who attend school full-time in Australia. The family has always lived in Australia. On 1 July 2011 Elizabeth travelled to South America to take up an accounting job with an American company. The contract was for two years with an opportunity to extend for a further year. Tom and her children stay in Australia while she is overseas. Elizabeth comes back to Australia every three months for two weeks holiday each time (8 weeks in total) during the year ended 30 June 2012. Elizabeth had her salary while overseas paid into her Swiss bank account. While in South America she stays in accommodation provided by her employer who has mining sites in four different locations.
Required:
Based on this information provide advice to Elizabeth as to whether she is a resident of Australia for the year ended 30 June 2012. Support your answer with reference to appropriate authority.
Part B
Key Ltd (Key) was incorporated in South Africa on 12 April 2003 and its shareholders are as follows:
- Jack an Australian resident holds 60% of the shares and voting power;
- Jill a resident of the USA holds 20% of the shares and voting power; and
- Jenny a resident of South Africa holds 20% of the shares and voting power.
Key's primary income earning activity is operating a manufacturing business in Melbourne. The general manager of the company lives in South Africa and makes the day to day decisions in relation to the company and communicates his instructions to the Australian manager each week via email. Key's board meetings including the annual general meeting are held in South Africa.
Required:
Based on this information provide advice to Key as to whether it is a resident of Australia for tax purposes and whether the income earned in Australia and outside of Australia is taxable in Australia. Support your answer with reference to appropriate authority.
Part C
Collins Pty Ltd a resident company carries on a transport business where it transports freight from Brisbane to Toowoomba each day. Collins has over 500 contracted customers that it provides transport and delivery services. During the year ended 30 June 2012 Collins had the following transactions:
- One of Collins' customers cancelled its transport contract on 4th May 2012 and paid $1,000 to Collins to compensate Collins for the loss of income for the remaining term of the contract.
- On 14th April 2012 Collins received a payment of $40,000 from Louis Pty Ltd (another transport company) as a result of Collins agreeing not to expand its operations for five years beyond its current business between Brisbane and Toowoomba.
- Collins had paid truck lease payments of $35,000 during the year ended 30 June 2011 and claimed tax deductions for those payments. On 13th October 2011 Collins was reimbursed $12,000 because it had overpaid the expense in the 2011 year.
Required:
Based on this information what amount should Collins bring to account as assessable income in the year ended 30 June 2012 (do not include capital gains)? Support your answer with reference to appropriate authority.
Part D
Patrick, a resident, carries on a wholesale business selling building materials to the construction industry. He had the following three transactions which are relevant to determining his assessable income in the year ended 30 June 2012:
- Patrick received a lease incentive of $20,000 to encourage him to take a new lease on a commercial business premises in Toowoomba so that he could re-locate his business. Patrick received the lease incentive on 12 April 2012 and moved to the new premises on 4 June 2012.
- Patrick ordered some building materials for one of his customers from an overseas supplier. Patrick received a deposit of $4,000 from the customer on 3 May 2012. If the building materials do not arrive from overseas Patrick must refund the deposit to his customer. At 30 June 2012 the building materials have not arrived in Australia.
- Patrick valued his closing stock at 30 June 2011 at cost of $56,000 for income tax purposes and on 30 June 2012 he valued his closing stock at replacement price of $68,000.
Required:
Based on these three transactions what is Patrick's assessable income for the year ended 30 June 2012? Support your answer with reference to appropriate authority.
Part E
Jeremy, a resident, works for Walker Pty Ltd as a lawyer and had the following transactions in the year ended 30 June 2012:
- Walker Pty Ltd provided Jeremy with the use of a motor car for his private use for the whole of the financial year ended 30 June 2012. The market value of the benefit was $9,000 but only Jeremy can use the car.
- On 27th July 2012 Walker Pty Ltd paid Jeremy a bonus of $3,500 for the year ended 30 June 2012.
- On the week-ends Jeremy works for a landscape gardener where he does a lot of physical activity and received $20,000 for this work for the year ended 30 June 2012. Jeremy undertakes this work to keep fit and earn some money to enable him to attend a major overseas music concert each year.
Required:
Based on this information what amount should Jeremy include in his assessable income for the year ended 30 June 2012? Support your answer with reference to appropriate authority.
Case Study Two
Part A
Toni Pty Ltd, a resident company, carries on a motor vehicle insurance business and the following three transactions are relevant to determining the company's allowable deductions for the year ended 30 June 2012:
- The accountants for Toni included a provision of $9,000 for annual leave in the financial statements for the year ended 30 June 2012. The actual annual leave paid for the year ended 30 June 2012 was $8,000.
- On 29 June 2012 one of Toni's clients who had motor vehicle insurance reported that they had an accident in their car and that the cost of repairs was $15,000. The client is entitled to be covered for this accident under their policy of insurance.
- The accountants for Toni included a provision for future insurance claims of $20,000 in the financial statements for the year ended 30 June 2012. None of these claims constituted a presently existing liability at 30 June 2012.
Required:
Based on this information what amount can Toni Pty Ltd claim as a tax deduction under s 8-1 ITAA 97 for the year ended 30 June 2012? Support your answer with reference to appropriate authority.
Part B
Caroline, a resident, is a qualified lawyer and a specialist in contract law. She works for Offer Pty Ltd and in the current year she had the following transactions which are relevant to determining what amount of tax deductions are available to her:
- Caroline takes the train to work each day from her home and she paid $780 for train fares during the year ended 30 June 2012.
- Caroline regularly has to attend the court to defend her clients and she incurred $1,500 in taxi fares for travelling from her normal workplace at Offer Pty Ltd to the court and returning to her workplace. Her employer did not reimburse her any of this amount.
- Caroline paid $900 in taking clients of her employer to dinner at a very stylish restaurant with city views during the year. Her employer paid her an entertainment allowance of $800 during the year.
Required:
Based on this information what amount can Caroline claim as a tax deduction under s 8-1 ITAA 97 in the year ended 30 June 2012? Will she have to include any amount in assessable income as a result of these transactions? Support your answer with reference to appropriate authority.
Part C
Andrew, a resident, carries on a business providing accounting services to clients in Toowoomba. Andrew has 15 staff and he accounts for his income on an accruals basis. The following information relates to his accounts receivable/trade debtors for the year ended 30 June 2012:
- During the current year one of Andrew's clients who owed him $2,000 as at 30 June 2011 was experiencing financial difficulties and Andrew forgave the debt on 15 April 2012. Andrew wrote off the debt on 30 June 2012.
- Andrew made a provision of $27,000 for bad debts in his financial statements for the year ended 30 June 2012 based his expectation that 10% of his accounts receivable would not pay him.
- On 29 June 2012 Andrew identified that one of his clients that owed him $7,000 was declared bankrupt and Andrew made a written note evidencing that the debt had been written off.
Required:
Based on this information what amount can Andrew claim as a tax deduction for bad debts under s 25-35 Income Tax Assessment Act 1997 in the year ended 30 June 2012? Support your answer with reference to appropriate authority.
Part D
Katie, a resident, carries on a business providing engineering consulting services to the construction industry and had the following transactions in the year ended 30 June 2012 which are relevant to determining the amount of tax deduction available to her under s 25-10 ITAA 97:
- Katie purchased a new laptop computer costing $1,500 on 1 September 2011 and she expects that the computer will have a useful life of 4 years. She will use the computer 100% in earning her assessable income. Katie's old computer was worn out and the new computer did not have any improved features when compared with the old one.
- Katie paid $800 for putting a new set of tyres on her car which she uses 70% for income earning purposes. The original tyres were worn and needed replacing.
- Katie paid $350 to have the screen replaced on her ipad. The screen was broken when the ipad fell on a concrete floor. Katie had purchased the ipad on 23 May 2011. Katie uses the ipad 50% for income earning purposes.
Required:
Based on this information what amount can Katie claim as a tax deduction under s 25-10 ITAA 97 in the year ended 30 June 2012 (nearest $1)? Support your answer with reference to appropriate authority.
Part E
Elizabeth is a property investor and she purchased a new residential property on 1st October 2011 for $350,000. The builder had indicated to her that the construction costs were $167,000 and in addition the land had cost the builder $72,000. Elizabeth immediately rented out the property to tenants for $320 per week.
Required:
Based on this information what amount can Elizabeth claim as a capital works deduction for the year ended 30 June 2012 under Division 43 ITAA 97 (nearest $)? Perform any necessary calculations. Support your answer with reference to appropriate authority.
Case Study Three
Part A
Tom's grand aunt Eleanor died on 4 June 2012 leaving 1 000 shares in CSR Ltd to Tom in her will. Eleanor had purchased 400 of the shares in 1984 for $1.50 each incurring $250 in brokerage fees on the purchase. The other 600 shares were purchased by Eleanor on 3 March 2007 for $8.50 each incurring $100 in brokerage on the purchase. The shares were trading at $10.70 on the Australian Stock Market on 4 June 2012. Tom decided to hold on to the shares rather than selling them.
Required:
What is the cost base of the shares acquired by Tom as a result of the death of Aunt Eleanor? Support your answer with reference to appropriate authority.
Part B
Anthony, a non- resident, purchased a residential rental property in Brisbane, Queensland on 25 October 2007 at a cost of $560,000 and incurred $20,000 in stamp duty and legal expenses at the time of the purchase. On 12 July 2011 Anthony purchased a residential rental property in Miami, Florida in the USA for $340,000 and paid $5,000 to a property consultant in advising him in relation to the purchase. Anthony did not live in either of the properties but rented both of them out to tenants until 23 February 2012 when he sold the Brisbane property for $700,000 and the Florida property for $470,000.
Required:
Based on this information what amount of net capital gains in accordance with the ITAA 97 will Anthony derive from the sale of the properties? Support your answer with reference to appropriate authority.
Part C
Liam, a resident, purchased a residential premises on 1 January 2001 in Toowoomba at a cost of $450,000 incurring stamp duty and legal expenses of $23,000 on the purchase. Liam immediately moved into the property and commenced using it as his home. On 1 January 2006 Liam moved to Melbourne to enable Liam to commence a new job working with a large accounting firm and the house in Toowoomba was rented to tenants. He was provided with accommodation in Melbourne for a period of three years and on 1 January 2009 Liam moved back to Toowoomba and re-commenced living in his Toowoomba home. The market value of the Toowoomba property was $550,000 on 1 January 2006 and $580,000 on 1 January 2009. Liam sold the property on 1 January 2012 for $670,000 to enable him to move to Brisbane.
Required:
Based on this information what amount of net capital gain will Liam derive from the sale of the house? (Minimise the net capital gains wherever possible with available elections). Support your answer with reference to appropriate authority.
Part D
Nicholas, a resident, purchased a residential rental property in Brisbane on 13 June 2001 at a cost of $350,000 and incurred $9,000 in stamp duty and legal expenses at the time of purchase. Nicholas also paid $4,000 to a building consultant to check out the property to ensure that it was structurally sound at the time of purchase. He immediately rented the property out to tenants and has rented the property at all times while he has owned the property. On 14 September 2004 he put on an extension to the property building two extra bedrooms at a cost of $130,000. Nicholas sold the property for $670,000 on 10th October 2011. Nicholas incurred real estate agent fees of $13,940 and legal fees of $1,500 in selling the property. Nicholas had paid $88,000 of interest on borrowings to purchase the property over the period that he owned it.
Required:
Based on this information what is Nicholas's cost base of the property at the time of sale? Support your answer with reference to appropriate authority.
There are four recognised stages in completing a tax law problem:
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Identify the tax law issues that are raised by the facts.
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Identify the relevant authorities which will include legislation, decided cases and other materials including Commissioner's Rulings and Determinations.
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Apply the law to the facts by using established authorities to determine the appropriate taxation treatment. Review the application of the law from every perspective.
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Come to a conclusion on the issues that you have identified and discussed.
Note this methodology is sometimes referred to as ILAC: I (Issue), L (Law), A(Application), C (Conclusion).
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Marks to be awarded 10
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Major issue or part of question
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2
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Identification of issue(s) from the facts - marks will be allocated based on the ability to clearly state the issue(s) and the relevance of the issue(s) in the current context. Where there is an unclear statement of the issues or omission of issues in an answer lesser marks will be awarded.
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2
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Identification of the relevant law in the area including cases, legislation, rulings, determination or other authority - marks will be allocated based on your ability to clearly identify the legal framework in which the issue(s) resides. Where there is an incomplete identification of the relevant authorities lesser marks will be awarded.
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4
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Apply the law to the facts providing discussion and analysis sufficient to demonstrate knowledge and understanding of the application of the law. Marks will be awarded based on your ability to apply the law to the facts and on the basis of your ability to develop logical argument and evaluate the strengths and weaknesses of alternative outcomes. Irrelevant and repetitive material will attract lesser marks.
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2
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Conclusion logically flowing from the discussion and analysis. Marks will be awarded based on your ability to draw together the strands of your argument. Your conclusion should be clear and be derived from your application of the law. Little or no conclusion or a conclusion that is not based on the argument will attract lesser marks.
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Where the case study or question requires some mathematical calculations a separate amount of marks will be allocated for the calculations.