Limited-time offer! Save up to 50% Off | Solutions starting at $6 each  

Assignment on Taxation Laws

Added on - 27 Jul 2022

Trusted by 2+ million users,
1000+ happy students everyday
Showing pages 1 to 2 of 5 pages
Taxation Law
Subject: Business/Corporate Law
2. a. provide an estimate of annual net rental income or loss
There is a need for Matt to be aware that they will have to pay tax and the net rental income or
loss will come about after factoring in the aspect of expenditure and tax. For the first option, the
cost of maintenance is $8,000 which means that Matt will remain at $24,000. A tax rate of 32.5%
will be charged which will mean that the total income for the first option will be $13, 600 after
paying a tax and paying for an annual maintenance fee of $ 8, 000. This has been calculated with
a consideration of the expected income against the expected expenditure which Matt has to incur
so that tenants are kept delighted.
The second option will require him to pay a tax of $10, 400 plus the annual maintenance fee of $
30, 000. This will come to $ 40, 400 yet the total expected income stands at $ 32, 000. He will,
therefore, incur a loss of $8, 400. This has been calculated based on the amount of money which
is spent in taking care of the house against the expected income from the house. This has to be
considered because the house must remain in good condition so that it can keep on attracting
tenants. If this is not done then there are high chances that tenants might ignore such a house
which will be a loss to Matt (Hulse & Burke, 2016).
b. Provide an estimate of the net capital gain on sale in 2022
For the first option, Matt will spend a total of $ 134, 700 plus the buying price which is $ 480,
000 whose sum will be $614, 700. He will also have paid tax which will be charged at $10, 400
for three years which is inclusive in this figure. If the selling price will be at $ 700, 000 then
appreciation on the asset will be valued at $85, 300.
For the second option, Matt will spend $414, 000 plus the cost of purchasing which is at $ 480,
000 whose total will come to $ 894, 000. If the selling price is at $ 700, 000 then there will be a
depreciation valued at $ 194, 000. This shows that if Matt wants to benefit from this purchase
then the first option is the best since it will allow him to gain some profit unless the second
option which gives him losses throughout the process.
c. Which property will minimize Matt’s total taxable income from the investment?
You’re reading a preview
Preview Documents

To View Complete Document

Click the button to download
Subscribe to our plans

Download This Document