Your client Helen wants to fund her business as a fashion designer, therefore she has sold some of...

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Your client Helen wants to fund her business as a fashion designer, therefore she has sold some of the assets as follows: 1- An antique impressionism painting Helen’s father bought in February 1985 for $4,000. Helen sold the painting on 1 December 2018 for $12,000. (2.5 marks) 2- Helen sold her historical sculpture on 1 January 2018 for $6,000. She has purchased the piece on December 1993 for $5,500. (2.5 marks) 3- An antique jewellery piece purchased in October 1987 for $14,000. Helen sold the antique jewellery piece on 20 March 2018 for $13,000. (2.5 marks) 4- Helen sold a picture for $5,000 on 1 July 2018. Her mother purchased the picture in March 1987 for $470. (2.5 marks) Advise the Capital Gain Tax consequences of the above transactions. Question 2 (5 marks) Barbara is an economist researcher and commentator. The Eco Books Ltd offers her $13,000 for writing a book about economics principles. Barbara has never written a book about economics principles, but accepts the offer and writes the economics book called ‘Principles of Economics’. She assigns the book’s copyright for $13,400 to The Eco Books Ltd. The book is published and she is paid. She also sells the book’s manuscript to the Eco Books Ltd’s library for $4,350 plus several interview manuscripts she has collected while writing the economics book for which she receives $3,200. Discuss each of the above payments to Barbara separately and states if these are income from Barbara’s personal exertion. (2.5 marks) Would your answer differ if Barbara wrote the Principles of Economics’ book before signing a contract with The Eco Books Ltd in her spare time and only decided to sell it later? (2.5 marks) Support your answer by referring to relevant statutory and case law. Question 3 (5 marks) Patrick paid $52,000 to his son David to provide some assistance in his newly started business. They agreed that David repay his father $58,000 at the end of five years. Patrick provided this loan to David without any formal agreement or security deposit for the sum lent. Patrick told his son that he need not pay interest. However, David repaid the full amount after two years through a cheque, which was included an additional amount equal to 5% on the amount borrowed. By referring to relevant statutory and case law, you need to discuss the effect of these arrangement on the assessable income of Patrick. (5 marks)

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Question 1:
Helen wants to start her fashion designing business, she needed fund for that and so she sold some assets which were in her possession. The following calculations have been shown regarding her capital gain tax.
1. On December 1, 2018, Helen sold for $12,000 a painting of antique impressionism. In February 1985, her father bought that for $4,000. To calculate capital gain on this item one of the two methods can be used which are indexation method and discount method. But indexation method will be more appropriate since the item is very old. 
Australian Taxation Office has given the following criteria, all of which should be satisfied to apply indexation method on an asset:
(A) The asset should have bought by 21 September 1999, 11.45 A.M (the time mentioned in the ACT).
 (B) The owner should have possessed the asset for more than 12 months.
Australian Taxation Office has also listed certain exceptions which can be applied for the 12 months possession period:
(I) The asset came in the possession of the owner from a deceased person as the legal representative of that person and the deceased possessed the asset for more than 12 months before disposing the asset.  
(II) The asset came in the possession of the owner from relationship or marriage breakdown and in total the asset was in the possession of both the owners combined for more than 12 months. 
In this case, Helen got the asset from her father and he possessed the assets for more than 12 months. So both the condition for 12 months and indexation method are satisfied. 
Capital Gain = Sale Proceeds – Cost of Acquisition.
Indexation method,
Cost of Acquisition = Cost of acquisition (Original)* {CPI (Selling year)/CPI (Purchase Yea)}
	CPI in December, 2018 
	114.1
	CPI in February, 1985 
	37.9
	Cost of Acquisition [4000*(114.1/37.9)]
	$12,042.22
	capital loss 
[$12,000 - $12,042.22]
	$42.22
2. On January 1, 2018, Helen sold for $6,000 a historical sculpture. In December, 1993, she bought that for $5,500. To calculate capital gain on this item one of the two methods can be used which are indexation method and discount method. But indexation method will be more appropriate since the item is very old.  
Australian Taxation Office has given the following criteria, all of which should be satisfied to apply indexation method on an asset:
(A) The asset should have bought by 21 September 1999, 11.45 A.M (the time mentioned in the ACT).
 (B) The owner should have possessed the asset for more than 12 months.
Helen was in the possession of the asset for more than 12 months. So both the condition for 12 months and indexation method are satisfied. 
Capital Gain = Sale Proceeds – Cost of Acquisition.
Indexation method,
Cost of Acquisition = Cost of acquisition (Original)* {CPI (Selling year)/CPI (Purchase Yea)}
	CPI in January, 2018 
	112.6
	CPI in December, 1993 
	68.7
	Cost of Acquisition [5500*(112.6/68.7)]
	$9,015.56
	capital loss 
[$6,000 - $9,014.56]
	$3,014.56
3. On March 20, 2018, Helen sold for $13,000 a piece of antique jewelry. In October, 1987, Tshe bought that for $14,000. To calculate capital gain on this item one of the two methods can be used which are indexation method and discount method.

Your client Helen wants to fund her business as a fashion designer, therefore she has sold some of the assets as follows: 1- An antique impressionism painting Helen’s father bought in February 1985...

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