How is this loss allocated for tax purposes? If Joseph and Jane decide to sell the property, how would they be required to account for any capital gain or capital loss?

HA3042 Taxation Law

T2 2018 Individual Assignment (2500 words)

Due date: Week 10

Maximum marks: 20 (20%)

Instructions:

This assignment is to be submitted by the due date in soft-copy only (Safe assign – Blackboard).

The assignment is to be submitted in accordance with assessment policy stated in the Subject Outline and Student Handbook. It is the responsibility of the student submitting the work to ensure that the work is in fact his/her own work. Ensure that when incorporating the works of others into your submission that it is appropriately acknowledged.

Question 1 (5 Marks)

The Lotteries Commission conducts an instant lottery called ‘Set for Life’ under

which a winner who scratches three ‘set for life’ panels wins $50,000 each year

for 20 years. The first $50,000 is payable as soon as the winner is notified, and

later amounts are payable on the first anniversary of the first payment. In the

event of the death of the winner, the Commission may pay any outstanding

amounts to the deceased’s estate.

Requirement:

Is the annual payment income? Give reasons for your decision

Question 2 (06 marks)

Corner Pharmacy is a chemist shop. It provides no credit sales but accepts major

credit cards. It sells items off the shelf and the proprietor fills prescriptions for

cash and for payments made under the Pharmaceutical Benefits Scheme [PBS].

Three (03) assistants are employed. The following financial data is provided:

Cash sales ——————————————–$300,000

Credit card sales————————————-$150,000

Credit card reimbursements ———————–$160,000

PBS:

– Opening balance ———————————–$25,000

– Closing balance ————————————$30,000

– Billings ———————————————-$200,000

– Receipts ———————————————$195,000

Stock

– Opening stock————————————–$150,000

– Purchases——————————————-$500,000

– Closing stock —————————————$200,000

Salaries ————————————————$60,000

Rent —————————————————-$50,000

Requirement:

On the assumptions that an accrual basis applies and the cost of sales and other

outlays are allowable deductions for tax purposes, calculate the pharmacy’s

taxable income.

Question 3 (04 marks)

What principle was established in IRC v Duke of Westminster [1936] AC 1? How

relevant is that principle today in Australia?

Question 4 (05 marks)

Joseph (an accountant) and his wife Jane (a housewife) borrowed money to

purchase a rental property as joint tenants. They entered into a written

agreement which provided that Joseph is entitled to 20% of the profits from the

property and Jane is entitled to 80% of the profits from the property. The

agreement also provided that if the property generates a loss, Joseph is entitled

to 100% of the loss. Last year a loss of $40,000 arose.

Requirement:

How is this loss allocated for tax purposes? If Joseph and Jane decide to sell the property, how would they be required to account for any capital gain or capital loss?

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