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Business Primary Producers In Detail - Assignment
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Added on 2021-05-30
Business Primary Producers In Detail - Assignment
Added on 2021-05-30
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1)Jenny, wife of a famous jazz singer, will receive $1 million on retailing the story of herhusband to a publishing house. Jenny will receive $500,000 immediately and rest of themoney after the interview is done. In the given case the money received by Jenny istaxable. The following laws and rulings will demonstrate the reason for the conclusion.Any person who is receiving or will receive any amount of payment from giving any interview tothe media, may or may be form a part of the assessment of the income as per the circumstance. Ifwe consider the fact stated above, it is evident that Jenny is receiving payment. We shouldconsider the following to deduce whether it is income or not. (2001/206, n.d.)The money received is of significant amount, it is not merely to cover the cost incurred orthe inconvenience of the assesses.Assesses need to provide a service (in the form of giving a story to the media) in return ofthe amount received.The tax payer’s need to provide a service so that he/she can receive the payment in lieu ofthe service, also the discussion regarding any negotiation or arranging the terms ofpayment and planning the interview clearly states that it was not spontaneous in nature.Now if we consider the case study of Higgs v Olivier 33 TC 136, we will understand the nature of taxable income of Jenny:In the given case it so happened that Oliver, the actor entered into an agreement to produce, direct as well as act in the film “Henry 5”. However, the film could not do well on release, later on it was agreed for the better promotion of the file that if Oliver did not appear in any film or direct or produce any other film other than the one with the same production house for a period of 18 months, he will be paid a sum of $15000. Though it is not the onus of the company to compulsorily employ him for that period.Conclusion: It was held as capital receipt, since the taxpayer was not receiving this amount for the role played by him or as a further remuneration for the film. He received this in nature of not playing any role or producing or direct any film for 18 months.Similarly, Jenny who will receive an amount of $1000000, will consider it as capital nature for narrating the story of Henry’s life.
b) If Jenny had written the book herself, then also it would have been considered as aprofessional income. Writing a book is considered as a hobby until and unless it has not beenpublished. If Jenny writes and publish the book, it will be considered as a professional income.It is an income which the assesses is receiving on providing a professional service, whichincludes the following:Gift and premiumany money received for any advertisementRoyalties received for any exclusive right for any work related to art, drama, danceamount received as patent for any new creationIf a person is providing an interview to media or writing a book or article will count asprofessional, if the services provided is for one or more than one time, and he/she has to providethe service to earn the income received from it. Also, the person’s previous engagements are notcontinuous in nature, as well as it is not generating much revenue. In the given case, Jenny willreceive money on writing the story and assuming that she does not have any continuousengagement to deal with, the money received by Jenny on writing the book will be considered asan assessable income in her hand.Conclusion: As per the above provision, Jenny is liable to pay tax for writing and publishing thestory and it will be considered as professional earning. Also, she can claim deduction for anyexpenses incurred by her for the expenses incurred related to writing and publishing the story.
2) As per Section 8-1 one can deduct from there assessable income the amount of loss or anyexpenditure to the extent that:It was incurred to gain or produce your assessable income,It is necessarily incurred in carrying on a business for the purpose of gaining or producing yourassessable income. (Income Assessment Act 1997, n.d.)Section 8-1 (2) provides that we cannot deduct a loss or expenditure:It is a loss or expenditure of capital or of capital nature,it is a loss or expenditure of a private or domestic nature; orit is incurred in relation to gaining or producing yourexempt income or yournon-assessable non-exempt income; ora provision of this Act prevents you from deducting it.However, Sally being the head of her house and sole provider of her child can claim exemption.This exemption can be claimed by either of the parents for joint custody, but it is evident thatsally is the sole provider of her child. So, she can claim exemption provided the following points are fulfilled:The reason for sending her child to child care is not to earn income,Her all total income does not exceed $100,000 or equal.Daughter’s age is below 12 years oldConclusion: So as per the given case Sally who is a single mother and wants to deduct theexpense incurred for keeping her job, which is actually domestic in nature, will not beconsidered as an expense for earning the income. The income earned by her should beconsidered a whole, provided she can claim exemption under the dependent if the abovecriteria is fulfilled.
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