Calculating the Capital Gains Tax

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Calculating the Capital Gains Tax

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Running head: TAX LAWTax LawName of the Student:Name of the University:Author’s Note:
TAX LAW2Table of ContentsQuestion 1:.......................................................................................................................................31. Determining the Capital gain of the current year:.......................................................................32. Capital gains if the land was purchased before 1984 October 20th:...........................................43a. Calculating the capital gains if the building was built on 20th May 2003:.................................53b. Calculating the capital gains tax if the building was built on 20th May 2017:...........................6References:......................................................................................................................................7
TAX LAW3Question 1:1. Determining the Capital gain of the current year:ParticularsIndexation MethodDiscount MethodSale of property\$300,000.00 \$300,000.00 Building cost\$100,881.06 \$100,000.00 Land cost\$51,422.16 \$50,000.00 Total Cost\$152,303.21 \$150,000.00 Capital Gains\$147,696.79 \$150,000.00 Less: 50% Discount\$0.00 \$75,000.00 Net Capital Gain\$147,696.79 \$75,000.00 Rosemary has mainly bought the land during 1997, while major improvement in theproperty was conducted during 1999. Therefore, Rosemary could use both indexation anddiscounted method for determining the relevant capital gains tax if the property was sold in thecurrent year. Moreover the property was held for more than 12 months which allows Rosemaryto get a 50% discount on the capital gains tax. Under the Income Tax Assessment Act 1997,Division 115, Subdivision 115-A, and Section 115-15, relevant usage of discounting method aredepicted adequately (Ato.gov.au 2017). The relevant discounting method could directly generatecapital gains tax of \$75,000. However, the use of indexation method could also help in determining the capital gainstax of Rosemary, which will amount to \$147,696.79. Under the Income Tax Assessment Act1997, Division 960-General, Subdivision 960-M, and Section 960-275, relevant indexationmethod is depicted (Campbell 2015). Before the evaluation of both the taxation method mainly

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