1- Jock is a professional cricketer from Zimbabwe. He contracts to play cricket for Melbourne in the Dippy Cup Competition and arrives in Australia on 1 September 2009 for six weeks ‘acclimatization' before the start of the competition on 18 October. His wife accompanies him; he has no children. He returns to Zimbabwe on 29 march 2010 after signing an agreement to return in August 2010 for a coaching engagement before playing in the 2010-2011 competition. I Jock a resident for tax purposes and Why?
2- Neighbors Felix and Oscar are retired and devote their spare time to gardening. Felix grows marrows that are the envy of the neighborhood. Oscar's rhubarb has won him many admirers. On a regular basis they exchange surplus stocks. Would ss26(e) [ITAA97 s 15-2], 21 or 21A apply to the exchange and why?
3- Designa-Kitchens manufactures Kitchen cupboards. During the course of kitchen Expo it offered prizes of kitchen units to the value of $5,000 to the 5000th visitor and the most successful consultant at its booth.
(a) Would 6-5 apply to either of the transactions?
(b) Would ss26(e) [ITAA97 s 15-2}, 21 or 21A apply to the award to the consultant?
(c) Would there be any difference if the price to the consultant was airline tickets?
4- Quizco is a market research firm which specializes in market surveys for the tobacco industry. The company has contracts with four cigarette manufacturers. As a result of amendments to state laws concerning cigarette advertising, one contract was terminated. The contract had four years to run and provided up to 60% of Quizco's gross income. The cigarette company obtained a release from the contract for a payment of $150,000. Advise Quizco whether the amount of $150,000 is income.
5- In the year ending 30 June 2011, Sigma makes a capital gain, after allowing for indexation, of %150,000 from the sale on 1 August 2010 of Blackacre, a CGT asset that Sigma acquired on 1 January 1990. Assume that Sigma chose frozen indexation rather than the 50% discount incalculating this capital gain. In the ending 30 June 2011, Sigma also makes a capital loss of $100,000 from the sale of another asset, Whiteacre, acquired on 1 January 1990. Sigma also sells another asset, Yellowacre, on 1 February 2011. Yellowacre was acquired on 1 January 2001. Prior to applying the discount percentage, the capital gain from Yellowacre is $150,000. Calculate whether Sigma would be better advised to offset the capital loss from Whiteacre against the capital gain from Blackacre or against the capital gain from Yellowacre.
6- After reading through s 104-5, identify the CGT events that could have potential application in each of the situations listed below. In each case, identify what you believe to be the most appropriate CGT event.
1. Frank enters into a contract to sell pre-CGT land to Effie.
2.Effie enters into a contract to sell post-CGT land to Anne.
3.Anne grants Bill an option to purchase post-CGT shares.
4. Bill exercises the option to purchase post-CGT shares that Anne granted to him.
5.Michael defaults on a contract to purchase post-CGT land from Alex and forfeits the deposit that he paid under the contract.
7- Are the following true or false?
a. CGT event C2 happens when an option expires?
B. The market value substitution rule will always prevent a taxpayer from making a capital loss on the expiry of a restrictive covenant.
C. If a creditor agrees to release a debtor from his/her obligation to repay a debt CGT event C2 happens at the time the contract of release is entered into.
D. CGT event C2 applies to a lease that was renewed before 20 September 1985.
E. CGT event C2 does not apply to the discharge by performance of a contractual right where the contract was entered into before 20 September 1985.
8- Dorian acquires a small farm of 25 ha north of Metropolis. He plans the cultivation of an exotic nut-bearing tree, the fruit of which allegedly provides the elixir or life. After conducting feasibility studies, Dorian orders the seedlings. However, due to a nitrogen deficiency in the soil, he is advised first to sow a crop of lupins, briefly graze sheep and then plough the crop back into the soil. Dorian proceeds in this manner but before planting the trees a predicted drought and a decline in word nut prices force him to abandon the plan.
A. Why is the question of ‘carrying on a business' relevant to income tax?
B. Advise Dorian whether, for taxation purposes, he can be said to be carrying on a business.
C. What deductions (if any) would be available to Dorian under s 8-1?
D. Would the interest on a loan to acquire the property be an allowable deduction?