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Assignment Taxation Law

   

Added on  2020-03-16

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TAXATION LAWQuestion 1The objective is to determine the taxable income for June based on the given information.The various cash inflows that June has received would be analysed to determine whetherthere would be any contribution to the assessable income or not.Salary of $ 22,500 from Bo-tom University – This would be reflected as assessableincome in line with s. 6(5) ITAA 1997 as salary would constitute ordinary income.Ordinary income is one of the sources to assessable income for the taxpayer (CCH,2013).Previous year salary paid this year – This would be reflected as assessable income inthe previous year statement only and the same would not be considered as assessableincome for the current year (Gilders et. al., 2016).Four Tickets to the Opera- This would not be assessable income and would instead betermed as gift due to which no tax would be levied. The various conditions whichmake this gift are as follows (Barkoczy, 2017).1)June has been actually given the tickets and hence ownership transfer is takingplace.2)June has not asked for the same which is apparent from the one-off andunexpected nature of the gift.3)There are no reciprocal expectations in the present or future related to the givenextension of ticket.4)Further, the extension of tickets is an act of benefaction directed towards June.Retainer income from CIY – With regards to assessing income, there are two methodsnamely the receipts method and the earnings method. For the retainer, assuming thatthe money paid is non-refundable, hence the receipt method is suitable for recognitionof the same in line with tax ruling TR 98/1 (Sadiq et. al., 2016). Hence, the retainerincome to the tune of $ 250,000 would be considered as assessable income for theyear ending on June 30, 2016.Fees revenue from CIY – Again, it needs to be determined as to which method wouldbe found suitable for recognition of assessable income. Since the income in the givencase is being derived on the basis of skills and not any capital goods, hence in linewith TR 98/1, the receipt method would be found most suitable (Deutsch et. al.,2016). As a result, the total receipts in the given year would be recognised asassessable income which would stand at $2,920,000.Compensation payment for CIY- In relation to compensation, the nature of thereceipts is decided by the underlying purpose for which these are provided. In thegiven case, out of the total compensation of $ 400,000 about $63,000 was provided bythe insurer for the loss of profit (Barkoczy, 2017). Hence, only $ 63,000 would beconsidered as revenue receipts and hence would contribute to assessable income whilethe remaining component would be capital receipts and hence non-taxable.Hence, based on the above discussion, total assessable income for June (FY2016) = 22500 +250000 + 2920000 + 63000 = $3,255,500
Assignment Taxation Law_1

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