Question 1 (10 marks) You are working as a tax consultant in Mayfield, NSW. Your client is an investor and antique collector. You have ascertained that she is not carrying on a business. Your client...

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Answered Same DaySep 18, 2020HI6028

Answer To: Question 1 (10 marks) You are working as a tax consultant in Mayfield, NSW. Your client is an...

Ashish answered on Sep 22 2020
168 Votes
HI6028 Taxation Theory, Practice & Law
Student Name:
September 21st, 2018
Question-1
Solution-
Capital gain distributions are chargeable to tax at 35%. A risk adverse investor will be more interested in receiving dividend because of its nature of certainty than in making capital gain on investment which is charged at a higher rate especially short term capital gain. Therefo
re, he/she will prefer a dividend paying stock rather than a non dividend paying growth oriented stock.
Stockholders by their very nature are risk averse. Majority of stock holders prefer dividends to capital gains as they consider dividend to be more of permanent nature than the capital gains which are uncertain. Hence in countries where stockholders do not have control over managers.
Block of vacant land:
· The CGT for the event A1 occur at the time of contract is going to sign on the dated June 3rd (s104-10). Therefore, the amount of the $20,000 of the total sales price is paid as the taxation year is not relevant.
· The land is must be consider as the CGT assets.
· The cost bases for the land are $120,000.
· The deductions for the expense the rate of water and sewerage rate are not eligible because no income is generated from the land. Also, this includes in the element 3 of the cost bases (Assets acquired after the date of 20th August 1991) (110-25(4).
· The capital gain comes as the sales procedure is higher than the cost bases.
· The Overall Gain is $200,000
· The Sub Division 115 A defines that the gain is eligible for the discounted capital gains.
· Antique bed:
· The CGT event C1 considers when the antique bed was stealing.
· The 104-20 defines that the time of the event is the major concern for the company able to get the insurance process. (21st January).
· The 108-10 defines that the antique bed is a collectable.
· The s118-110 (1) defines that the P & L are not consider as the acquiring cost higher than $500.
· The cost base for the bed is $5,000
· The s110-25 (5) defines that the any changes are included in element 4 of the cost base.
· The s 114-1 defines that the index applicable to the cost is totally based on the bed was buy before the dated 21st Sept. 1999.
· The Quarter of Sept. 1986 the index number the assets purchased is 43.2.
· The Quarter of Dec. 1986 the index number is altering according to 44.4.
· The s 960-275 defines that the Quarter of 30th Sept. 1986 the number of the index, the assets steal is 68.7.
· The factors of index are as follows:
· The s 960-275 defines that the, 68.7 /43.2 = 1.590
· The s 960-275 defines that the, 68.7 / 44.4 = 1.547
· The cost base according to the index is $7,884
· Element 1 is considered as the $5,565
· Element 4 is considered as the $2,321
· The capital gain comes into the picture if the sales procedure is higher than the cost base.
· Overall Gain = $6,000
· The Sub Division 115A defines that the all the related profits are eligible for the discount in capital gain.
· The capital gain shows the sales procedure higher than the indexing cost bases.
· Overall Gain is $3,114
· Painting:
· The s 104-10 defines that the CGT event A1 occurs if the painting were sold on the dated 3 April.
· The s 108-10 defines that the painting is the work of art, so that must be consider as the collectables.
· The s 104-10 (5) defines that the painting was acquired on the 2nd May 1986. This date is before the start of the CGT for that any gain is not considerable.
· Sales of shares:
· The 1,000 shares in to the common bank:
· The s 108-5 defines that the shares are related to the CGT.
· The s 104-10 defines that the CGT event A1 occurred when all the shares are sold on 4th July.
· The s 114-1 defines that the index doesn’t applicable to the cost base because the share...
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