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Question 1 (3 marks) Hilary is a well-known mountain climber. The Daily Terror newspaper offers her $10,000 for her life story, if she will write it. Without the assistance of a ghost writer, she...

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Question 1 (3 marks)
Hilary is a well-known mountain climber. The Daily Te
or newspaper offers her $10,000 for her life story, if she will write it. Without the assistance of a ghost writer, she writes a story and assigns all her right, title and interest in the copyright for $10,000 to the Daily Te
or. The story is published and she is paid. She has never written a story before. She also sells the manuscript to the Mitchell Li
ary for $5,000 and several photographs that she took while mountain climbing for which she receives $2,000.
Requirement:
Discuss whether or not the three payments are income from personal exertion. Would your answer differ if she wrote the story for her own satisfaction and only decided to sell it later?
Question 2 (2 marks)
Eric provides his employee with the use of a car for 183 days during the FBT year. During this period the car travelled 16,000 km. Eric purchased the car last year for $50,000. The employee contributed $1,000 towards the cost of running the car and has provided Eric with relevant documentation. Requirement:
Calculate the taxable value of the car fringe benefit using the statutory formula.
Question 3 (5 marks)
Your client is a parent who lent $40,000 to her son to provide a short-term housing loan. The agreement is that the son will repay $50,000 at the end of five years.
The loan was made to the son without any formal agreement and without any security provided for the sum lent. In addition, the client (the mother) has informed you that she told her son that he need not pay interest. However, the son repaid the full amount after two years and included in his payment an additional amount which was equal to 5% pa on the amount bo
owed. Only one cheque was presented for the total amount.
Requirement: Discuss the effect on the assessable income of the parent.
Question 4 (10 Marks)
Scott is an accountant who purchased a vacant block of land in Brisbane on 1 October 1980. On 1 September 1986, Scott built a house on the land. At the time, the land was valued at $90,000 and the cost of construction was $60,000. The property has been rented out since construction was completed. On 1 March of the cu
ent tax year, Scott sold the property at auction for $800,000. Requirement:
a) Based on the information above, determine Scott’s net capital gain or net capital loss for the year ended 30 June of the cu
ent tax year.
) How would your answer to (a) differ if Scott sold the property to his daughter for $200,000?
c) How would your answer to (a) differ if the owner of the property was a company instead of an individual?
Answered Same Day May 29, 2020

Solution

Pulkit answered on Jun 01 2020
150 Votes
Question 1
As per the definition provided by the Income Tax Assessment Act, 1997 income that would be included must be arising from, salary, by way of bonus, commission, any pension or other benefits of the same, business income, service income from any property or any sale from property, and any other such income as received from any personal exertion basis. As per s 6 of the Income Tax Assessment Act, 1997 any income as received by the way of interest must be excluded from the definition of the income. An exception in this case is that any business engaged in the work of lending and renting of movable or immovable things and any dividend income in the definition of income as provided by the Income Tax Assessment Act, 1997.
According to the definition of income as given by the Income Tax Assessment Act, 1997 the amount of $10000 as received by Hilary is to be considered as the personal exertion income. This is explained in a case study where a person paying tax i.e., the taxpayer sold the copyrights of husbands life story and it was held in the case that the wife would be liable to pay the amount of tax as an assessable income and such amount would not be considered as any capital gain since the payment was provided in the exchange of wife’s time and services. By the reference of the above case, we can say that Hilary’s income as earned by her on the sale of the rights, her title, and the interest in the story that was published. By the sale made to Mitchell li
ary of the story manuscript of $5000 would also form the part of personal exertion income due the reasons as mentioned above. The sale of photographs for the amount of $2000 would also become the part of personal exertion income as the amount was given to her as she has the skills of mountain climbing.
In case Hilary would have written her own story firstly for her own satisfaction and then afterwards sold such story, the treatment as mentioned above would be applicable as she would be earning such income again from her personal skills and due to her efforts.
Question 2
The calculation of car fringe benefits taxable value can be done either by...
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