Hi6028 Taxation Law Management And Assessment Answers

Question 1

Over the last 12 months, Eric acquired the following assets: an antique vase (for $2,000), an antique chair (for $3,000), a painting (for $9,000), a home sound system (for $12,000), and shares in a listed company (for $5,000). Last week he sold these assets as follows: antique vase (for $3,000), antique chair (for $1,000), painting (for $1,000), sound system (for $11,000) and shares (for $20,000). Calculate his net capital gain or net capital loss for the year.

Question 2

Brian is a bank executive. As part of his remuneration package, his employer provided him with a three-year loan of $1m at a special interest rate of 1% pa (payable in monthly instalments). The loan was provided on 1 April 2016. Brian used 40% of the borrowed funds for income-producing purposes and met all his obligations in relation to the interest payments. Calculate the taxable value of this fringe benefit for the 2016/17 FBT year. Would your answer be different if the interest was only payable at the end of the loan rather than in monthly instalments? What would happen if the bank released Brian from repaying the interest on the loan?

Question 3

Jack (an architect) and his wife Jill (a housewife) borrowed money to purchase a rental property as joint tenants. They entered into a written agreement which provided that Jack is entitled to 10% of the profits from the property and Jill is entitled to 90% of the profits from the property. The agreement also provided that if the property generates a loss, Jack is entitled to 100% of the loss. Last year a loss of $10,000 arose. How is this loss allocated for tax purposes? If Jack and Jill decide to sell the property, how would they be required to account for any capital gain or capital loss? 

Question 4

What principle was established in IRC v Duke of Westminster [1936] AC 1? How relevant is that principle today in Australia?

Question 5

Bill owns a large parcel of land on which there are many tall pine trees. Bill intends to use the land for grazing sheep and therefore wants to have it cleared. He discovers that a logging company is prepared to pay him $1,000 for every 100 metres of timber they can take from his land. Leaving aside any capital gains tax issues, advise Bill as to whether he would be assessed on the receipts from this arrangement. Would your answer be different if he was simply paid a lump sum of $50,000 for granting the logging company a right to remove as much timber as required from his land? 

Question 1

Introduction

Eric has delineated examples of getting resources over the most recent one year. The ownership of the benefits with Eric thus can be noticed as that was legitimate for a period not as much as a year. The worries regarding the taxability of capital pickup for this situation can be acknowledged just because of the state of the advantage's offering cost being more noteworthy than the cost base at which it was obtained. One critical condition that could be seen on the account of the Eric is the failure to acquire indexation advantage since the benefits were held for not as much as a year (Coase, 2012).

Critical analysis

The advantages which are bought by people for satisfying individual destinations or delight and amusement could be named as resources for individual utilize. Collectibles are excluded from the benefits implied for individual utilize. The offer of advantages that have acquirement costs under $10000 can't be liable to tax assessment of the capital benefits picked up from benefits. The benefits obtained by Eric for individual utilize incorporate the offers of a recorded organization at the cost of $5000 and the home sound framework at $12000 (Gale et al., 2011).

The advantages which are obtained for satisfying extra targets, for example, self-efficacies and in addition giving happiness similarly as if there should be an occurrence of individual resources. The capital additions gained from the offer of collectibles acquired at costs equivalent to or under $500 can't be liable to the tax assessment. Eric acquired the collectibles which incorporate, an antique vase at the price of $2000, an antique chair at the price of $3000 and a painting at the price of $9000 (Hayek, 2012).

Supporting evidence

The data in regards to the obtainment expenses of individual resources and collectibles could be used for figuring capital benefits on the advantages that were with Eric for not as much as a year.

Conclusion 

It suggests that capital additions from the offer of individual resources could be assessable since the aggregate acquisition expenses of the individual resources obtained by Eric were recognized to be more than $10000. The collectibles were likewise valued at more than $500 which shows that the capital benefits from an offer of collectibles can be liable to the tax assessment. The count of net benefit can be computed by counterbalancing the yearly capital misfortunes with capital benefit (Helminen, 2011).

Question 2

Introduction

Here the case is being referred to suggest that credit of $1 million was taken by Brian from his manager for a time of three years at an extraordinary benefit of 1% loan cost. The impressive edge between the overarching financing costs and the exceptional loan cost is at risk for arranging the credit as an incidental advantage. In this manner, the statutory financing cost must be connected on account of advantage got from the credit and the loan fee that could be connected to this situation is observed to be 5.65% (Jördens, 2012).

Critical analysis

In an initial step, on the point of reference of barring the deductible rule, the estimation of the credit incidental advantage would be found. The emphasis of the deductible rule is at the factor that enthusiasm on the advance by executing real rate of intrigue ought to be deducted from that acquired utilizing the statutory loan fee (Lang, 2014).

 Intrigue computed with the statutory rate of interest= $1000000*5.65%= $56,500.

 Consequently, credit incidental advantages = $56,500-$10,000= $46,500.

Second step demonstrates that,

 Interest in view of statutory loan cost = $1000000*5.65%= $56,500.

The supposition at this stage depends on the factor that the intrigue would be genuine sum payable. Third Step is about, Brian, who has contributed 40% of the credit to address his future commitments and thus,

Tax-deductible intrigue cost = $56,500*40%= $22,600 which can be viewed as theoretical. In the fourth Step, the genuine duty deductible intrigue cost can be computed

On the intrigue in light of the real rate of intrigue which is: $10000*40%= $4000.

In fifth Step, it’s seen that, the subtraction of genuine duty deductible intrigue cost

From the theoretical figure could be introduced as, $22,600-$4000= $18,600.

Supporting evidence

The last tax collection sum payable by Brian could be ascertained through deducting the figure acquired in the fifth step from the credit incidental advantages built up in the initial step. Along these lines,

Last assessment sum = $46,500-$18,600= $27,900.

Conclusion

At the end of the time of the termination period of the advance if the interest is paid, then the considered period is assessed from the occurrence when the intrigue is payable. Despite what might be expected, if the intrigue is paid in regularly scheduled payments, then the regarded period is assessed from the time when the installment of interests begins (Lang et al., 2015). Another case could be considered if Brian is not obliged to reimburse the enthusiasm for which the approach for computation of net duty payable would be founded on the means portrayed above with the supposition of a zero percent genuine loan fee.

Question 3

Introduction 

In this case, the issue of taxation is detailed as follows: here a couple is involved named Jack and his wife Jill. Jack is an architect while his wife Jill is a housewife and they have hired the money for making a purchase of a rental property in the form of joint tenants. So for that, they have chosen the format of a written agreement in which it is mentioned that Jack is permitted for the 10 percent of the profits gained from the entire property and Jill is permitted for the rest of the 90 percent of the profits gained on the property (Miller & Oats, 2016). It is also included in the agreement that if a loss is generated by the property than Jack is solely responsible for the whole 100 percent of losses. But unfortunately, a loss of 10000 has incurred last year. So the issue here is how is such kind of loss is owed for tax purposes. If the couple makes a decision of selling the property how can a capital gain or capital loss can be interpreted.

Critical analysis

The case that is under concern includes a couple, Jack and Jill, who are tied in an assertion over leasing a property. The basic points of interest that are to be seen here for this particular situation refer to the dispersion of share of benefit which is 10% for Jack and 90% for Jill and in addition the rejection of any duties regarding misfortune for Jill. The investment property portrayed a loss of $10000 a year ago which can be ascribed as the sole duty of Jack. Jack has two potential alternatives to address the misfortune among which the counterbalancing of misfortune from Jack's different wellsprings of wage is one (Sadiq et al., 2012). The other arrangement could be distinguished in conveying the misfortune forward to one more year later on until the offer of the benefit. Then again, if the property encourages benefits then the gained sum must be appropriated proportionately among Jack and Jill in the proportion of 1:9.

Supporting evidence 

It is additionally fascinating to watch that Jack could likewise balance the loss of $10000 with the increases from the offer of the property. Along these lines, Jill couldn't be represented any duties concerning the ramifications of tax assessment on the procedures of the investment property while Jack needs to accept obligations for misfortunes caused through the property.

Conclusion 

From the above discussions regarding the case, it can be concluded that Jack can set off the misfortunes of a year prior to the present year if there is some compensation connecting from the offer on the property (Woellner et al., 2011). Likewise, if Jack does not have any pickup in the present year, such hardship must be borne by him and Jill is free of such obligation. Hence, in any conditions, the cost treatment can't impact Jill while Jack is under a pledge to hold up under such setbacks in his books.

Question 4

Introduction 

At the core of the tax evasion, the principle of tax avoidance standoff can even be called as the Web minster principle. Because of the decision taken by it is allowing the corporations and the individuals in structuring the financial arrangements for reducing the liabilities of tax till the time these structures are lying in the four comers of the black letter law. It states that by apparently adopting a purposive construction method for undoing the true nature of transactions that have been entered into with the only intention of avoiding the ones that are liable to tax legitimately.  

Critical analysis

The instance of IRC v Duke of Westminster [1936] AC 1 reflected on the legitimate privilege of a person to execute lawful means and systems to devalue their net wage toward the finish of a year. The huge rule that can be seen from the case could be featured as takes after:

The legitimate qualification of a person to actualize key changes in bookkeeping administration is for diminishing their aggregate wage. Appropriation of moral measures exempts a person from an installment of extra assessments (Zhang, 2012). Utilization of lawful assets and systems for diminishing the aggregate wage on which assessment could be ascertained bars the probabilities of addressing by specialists, for example, the Commissioner of Inland Revenue.

Supporting evidence 

In actuality, the use of these above-expressed points of reference in the cutting edge situation could be addressed by the inductions from new case laws (Miller & Oats, 2016). The use of new case laws proposes that an association encountering misfortunes could alter its monetary record insights nearby discounting the settled resources as per wanted esteems.

Conclusion 

In any case, it is basic for the association to embrace moral means for maintaining a strategic distance from any punishing activity. The tenets additionally absolved the exchanges of an association that help the operational parts of the association from addressing by legitimate experts.

Question 5

Introduction 

A large plot of land is owned by Bill in which space he has got many tall pine trees. So it is expected by Bill that he will be using this land for grazing the sheep and hence he wants to clear it off completely. It has been determined by him that a logging company is ready to pay him with 1000 dollars per day for each and every 100 meters of timber according to the amount they can take from the land (Helminen, 2011). By not taking into consideration the capitals that are gained and the issues of tax here it is suggested to give advice to Bill whether he is considered on the receipts from this kind of arrangement.

Critical thinking 

The case to be investigated for tax assessment in this inquiry alludes to the huge land parcel claimed by Bill that is populated plentifully with huge pine trees. Bill means to change the real estate parcel with the end goal of sheep brushing for which Bill procured the administrations of a logging organization. The installment got by Bill from the logging organization demonstrates two particular situations in which one includes the installment of a singular amount measure of $50000 for tidying up the enormous pine trees from the property while alternate includes repeating installments of $1000 for 100 meters of timber cleared by the logging organization.

Supporting evidence

The instance of getting a singular amount measure of $50000 could be accepted as a capital receipt for Bill close by suggesting the reality of allocating rights to another gathering for cutting off trees from the property (Gale et al., 2011). Another significant factor that must be considered for the qualification of the singular amount sum for capital increases assessment can be seen in the on-time nature of the receipt since the period required for regrowth of trees could be generous. Hence the points of reference of capital pick up assess suggest that the singular amount sum named capital receipt can be liable for tax collection. The second case in which Bill gets repeating receipts suggests that the principles for capital increases charge can't be connected. The pay got by Bill with repeating receipts would guarantee that the wage would be liable to tax collection as indicated by typical loan fees.

Conclusion 

Furthermore, in charge evaluation law, when one social occasion pitches favorable position for another get-together for an idea, the same may be seen as a capital receipt and assessable in his grip. Instead of this, since the chief case does not attract any capital get a charge, it must be managed under run of the mill obligation rates and not capital increments.

References

Coase, R.H., 2012. The firm, the market, and the law. University of Chicago press.

Gale, W.G., Hines, J.R. and Slemrod, J. eds., 2011. Rethinking estate and gift taxation. Brookings Institution Press.

Hayek, F.A., 2012. Law, legislation and liberty: a new statement of the liberal principles of justice and political economy. Routledge.

Helminen, M., 2011. EU tax law: direct taxation. IBFD.

Jördens, A., 2012. Government, Taxation, and Law. In The Oxford Handbook of Roman Egypt.

Lang, M., 2014. Introduction to the law of double taxation conventions. Linde Verlag GmbH.

Lang, M., Pistone, P., Schuch, J. and Staringer, C. eds., 2015. Introduction to European tax law on direct taxation. Linde Verlag GmbH.

Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.

Sadiq, K., Coleman, C., Hanegbi, R., Hart, G., Jogarajan, S., Krever, R., McLaren, J., Obst, W. and Ting, A., 2012. Principles of taxation law 2012. Thomson Reuters.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2011. Australian Taxation Law Select: legislation and commentary. CCH Australia.

Zhang, S.W., 2012. Theories of taxation law.