Need help with question 6 to 10. Answer about 100 word each question.
1 1. Showing workings and citations, calculate Brooke’s net capital gain or loss (assuming she has no other CGT events)(4 marks). Brooke owned a small apartment in Kew (‘Kew Apartment’) that she purchased from her mother Susan on 3 August 1999. Settlement occurred on 3 October 1999. Market value at the time of purchase was $300,000 however Susan felt bad about asking her daughter to pay too much money for the house so she sold the Kew Apartment to Brooke at the reduced price of $150,000. Brooke incurred stamp duty of $30,000 and solicitor’s fees of $10,000 on purchase of the Kew Apartment. Brooke immediately rented out the Kew Apartment. Brooke sold the Kew Apartment on 21 May 2018 for $800,000 and the purchaser also gave her a new gold Rolex watch valued at $50,000. 2. Explain, citing sections, whether or not the following expenses can be incurred in the cost base for each of the following situations. Note that all assets are post CGT (1 mark each). I. The cost of a conveyancing kit to complete transfer of a property purchased in 2012. II. The cost of repainting a crack in the bathroom of the taxpayer’s rental property. III. The cost of interest on money which was borrowed to acquire a property in 2015, which was sold for a loss in 2019. IV. The costs of legal fees incurred when the taxpayer’s neighbour alleged that they owned (and tried to claim) part of the taxpayer’s land. 3. Showing workings and citations, calculate Larry’s net capital gain or loss (assuming he has no other CGT events)(4 marks). On 1 June 2015 Larry’s uncle Ben died and he left Larry a small house in Geelong (Geelong House). Ben had purchased the house on 20 September 1987 for $30,000 and incurred $2,000 in legal fees when he bought the house. He also incurred $10,000 when he renovated the bathroom of the house. Ben used the Geelong House as his main residence since the date of purchase. The Geelong House had a market value of $300,000 at the date of Ben’s death. Larry has rented out the Geelong House since Ben’s death. On 15 July 2016 Larry entered into contracts of sale for the Geelong House. He sold the Geelong house to his daughter for $400,000. 4. Showing workings and citations, calculate Trent’s net capital gain or loss (assuming he has no other CGT events)(4 marks). Trent bought a house on 1 August 2007 for $450,000. He paid stamp duty of $20,000 on purchasing the property. He immediately moved into it. He lived in the property until 1 August 2009, at which point he bought himself an apartment to live in and rented out the house. At this time the house was worth $600,000. He then sold the house in August 2010 for $700,000. Real estate agent fees were $10,000. 2 5. For the below transactions for both Claire and for Jason state for each of them, if any, the CGT event, timing of the event, the capital proceeds, the cost base, and whether Div 115 applies. Where appropriate support your answer with legislative authority. Claire is an employee financial analyst who is employed by Jason who runs a small business in Northcote. Claire decides to resign from her job. Claire and Jason enter into an agreement on 1 March 2019 which states that Claire cannot work as a financial analyst within 10km of Northcote for a period of 3 years. Jason pays Claire $50,000 for entering into the agreement. 6. Discuss the deductibility of the $10,000 interest expense, and the $400 mould expense for Rowan (4 marks). Rowan works as an investment banker and he borrows $100,000 from QBank (QBank Loan). He uses $70,000 of the QBank Loan to purchase shares which will earn him dividends. He uses the remaining $30,000 of the QBank Loan to renovate his bathroom at home where he lives. This year, he incurs $10,000 in interest payments from the QBank Loan. Rowan also incurs $400 which is the cost of fixing mould in the bathroom of an investment property he owns. The mould existed when he bought the house but he did not discover it until later. 7. Consider whether the $70,000 is deductible for the taxpayer Sol Pty Ltd (4 marks). The taxpayer, Sol Pty Ltd (Sol) produces tanning products in Australia. This year, they were sued by a customer who had purchased one of their products. The customer alleged that the product burned their skin, and caused them physical injuries resulting in hospitalisation. Sol denied these allegations and stated that all their products were thoroughly tested. To defend the claim against them, Sol hired the best lawyers in town which cost them $70,000 in legal fees. Eventually, an out of court settlement was reached between Sol and the customer, and they did not have to continue court proceedings. 8. Discuss briefly, citing sections, whether the following are deductible (1 mark each). I. The travel cost of a taxpayer who travels between the airport where he is employed as a flight engineer, and a factory where he does contract work restoring old car engines. II. The cost of a membership to the Sandringham Yacht Club incurred by a businessman who likes to conduct his meetings with a view of the water. III. An amount saved in the taxpayer’s bank account in anticipation of his staff taking leave next financial year. IV. A suit purchased by a graduate accountant so that he can attend a job interview. 9. Matthew works as a chef at a popular Melbourne restaurant. He incurs the following expenses. Please advise him of their deductibility (2 marks each). I. Matthew decides he would like to make some extra money on the weekends. He thinks that he will be able to restore and sell old furniture so he enrols in a University furniture restoration course which will teach him how to restore furniture. The course cost him $3,000. 3 II. Matthew usually works solely as a BBQ chef at the restaurant in Melbourne. This year, his boss comes to him and says that he would offer Matthew a pay rise if he could also make pastries and desserts. Matthew does not know how to cook desserts, and enrols in a pastry course which costs him $1,500. 10. Discuss the deductibility of all of the below amounts for Frank (4 marks). Frank is a magazine editor who works from home a few days a week. His home office occupies 15% of his floorspace. The rest of the time he works from his office in the city. This financial year, Frank incurs the following expenses from his home office: $2,000 in electricity bills, $1,000 in Internet expenses, and $3,000 in interest payments on his mortgage. He visits his accountant for advice on preparing his income tax return and pays his accountant $250.