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Assignment on Taxation - Eric

   

Added on  2020-03-28

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TAXATION<Student ID><Student Name><University Name>
Assignment on Taxation - Eric_1
1.Calculation of annual net capital profit or loss:The attempts of Eric vested in procurement of certain assets have been observed in the courseof the past one year which is a clear indicator that he was in possession of the assets for aperiod lesser than a year. It has been established that capital gains could be assumed astaxable only under the condition if the selling price of an asset is greater than the cost base.Eric will also not be able to acquire the indexation benefit due to the possession of assets forless than a year (Andreas & Markus, 2014).Categorized of AssetsPersonal use assets that are intended for personal use are generally procured for personalenjoyment and this category excludes the collectibles. Sale of assets that are procured at costsless than or equal to $10000 to other persons could not be subject to the liability of taxationon capital gains. According to the requirements of the question, the personal assets acquiredby Eric include a home sound system and the shares of a listed company (Brean, 2013).While the procurement cost of the home sound system was found to be $12000 the shareswere found to be costing $5000. Collectibles could be defined as assets purchased by individuals for fulfilling personalefficacies alongside providing enjoyment like personal assets. In the case of collectible thatcapital gains are not taxable under the condition that the procurement cost of the collectiblesis less than or equal to $500 (Besley & Persson, 2013). The information provided in thequestion facilitates an impression of the collectibles acquired by Eric as follows. Ericacquired a painting that was associated with a procurement cost of $9000 and an antiquechair at a procurement cost of $3000. Another collectible acquired by Eric included anantique vase which amounted for an acquisition cost of $2000 (Becker, Reimer & Rust,2015). The data obtained from the above stated scenario could be utilized as inputs for formula tocalculate capital gain on the assets which were under possession for less than a year.Capital Data of the assetsAssetCost Base of AssetsCapital Proceeds ofAssetsNet Capital Profit/(Net Capital Loss)Home Sound12,00011000(1000) Loss
Assignment on Taxation - Eric_2
SystemShares in listedcompany 5,0002000015000 ProfitPainting 9,0001000(8000) LossAntique Chair 3,0001000(2000) LossAntique Vase 2,00030001000 ProfitNet CapitalGain/Loss5000 ProfitPoints to considers:-The assets that were acquired for personal use by Eric depict procurement costs more than$10000 which validates the taxability of capital gains on the assets (Drautzburg & Uhlig,2015).-The procurement costs of all the collectibles were estimated to be above $500 whichsuggests the applicability of taxation to the capital profits on the assets.-In order to identify the net profit or loss the annual capital losses have to be set-off withcapital gain. 2. The scenario suggests the provision of a three year loan by the employer of Brian to himwith the condition of a special one percent interest rate. Another notable highlight is observedin the condition of the employer for the interest to be repaid in monthly instalments. The loanamount is estimated to be $1 million and provision of such a substantial amount of loan atconsiderably lower interest rate than the prevailing rates in the market accounts forclassification of the loan as fringe benefits (Farhi & Werning, 2013). The element of statutoryinterest rate should also be considered effectively in order to determine the taxability of thebenefit from the loan. According to the information provided in the question, the loan wasoffered on April 1, 2016 which suggests that the statutory interest rate could be estimated as5.65% (Guner, Kaygusuz & Ventura, 2014). Step 1This step involves the calculation of the loan fringe benefit through discarding the deductiblerule. The deductible rule implies that the interest on the loan calculated on the basis of actualrate of interest should be subtracted from the interest on loan calculated on the basis ofstatutory rate of interest (Henneman, 2015).
Assignment on Taxation - Eric_3

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