Capital Gain Taxation and Fringe Benefit Taxes - Desklib

Running head: TAXATION
Taxation
Name of the Student:
Name of the University
Author’s Note

1
TAXATION
Table of Contents
Answer to Question 1......................................................................................................................2
Part A: Block of Land..................................................................................................................2
Part B: Sale of Antique Beds.......................................................................................................3
Part C: Paintings..........................................................................................................................3
Part D: Shares..............................................................................................................................4
Part E: Violin...............................................................................................................................4
Answer to Question 2......................................................................................................................6
Requirement a..............................................................................................................................6
Issues............................................................................................................................................6
Laws.............................................................................................................................................6
Application..................................................................................................................................9
Conclusion.................................................................................................................................10
Answer to Question 2B..................................................................................................................10
Reference.......................................................................................................................................11

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TAXATION
Answer to Question 1
The main purpose of the assessment is to effectively apply the concepts and principles of
Capital Gain Taxation (CGT) which is generally applied in the event when assets which are
acquired on or before 1985. This breeds the concepts of Pre CGT and Post CGT as per the
principle of applicability. The application of CGT is shown in the case of various items which
are considered for this assessment.
Part A: Block of Land
As per the case which is provided the client has entered into an agreement to sell a plot of
vacant land for a sum pf $ 320,000. Initially the land was acquired in 2001 for a sum of $
100,000 in 2001. As per the tax guidelines, a vacant land is to be considered as a capital asset
under the ownership of the taxpayer. In case the taxpayer decides to sell the vacant land than
CGT provision will be applicable on the taxpayer. However, the applicability provisions which is
on or after 1985 is also to be considered in the case. The tax guidelines further states that the
taxpayer must maintain appropriate records of all the expenses which the tax payer has incurred
on the capital asset so that the computation of net capital gains tax is easily computed (Faccio
and Xu 2015). It is to be noted that the expenses which the taxpayer incurs on the vacant land
cannot be claimed as deduction as per CGT rulings.
In the case, the taxpayer fall under the purview of applicability as the vacant land was
acquired in 2001. The taxpayer has also incurred expenses such as sewerage, water and land tax.
When the taxpayer entered into contract for sale of the land, he attracted the provisions of CGT
event A1 which is covered under “section 104-10 (1)” and therefore, the taxpayer must show the
sum received in their computation of tax liability as per “section 102-5, ITAA 1997”.

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TAXATION
Part B: Sale of Antique Beds
As per the scenario, the taxpayer had a antique bed which was valued recently for the
purpose of insurance and the valuation showed an amount of $ 25,000. The case further reveals
that the antique bed was stolen for which the taxpayer has received an amount of $ 11,000 as the
bed was not specifically covered in insurance deed.
The ruling for such items of collectible are covered under subdivision 108-B and the
section clearly puts out that a collectible is anything which the taxpayer or any associate can use
for the purpose of their pleasure and enjoyment (Dowd, McClelland and Muthitacharoen 2015).
The tax provisions of Section 118-10 (1), ITAA 1997 clearly covers that a collectible which has
of a value equal to or less than $ 500 will be exempted for the purpose of taxation.
In case the asset which is a capital asset in nature is damaged or destroyed then CGT
event C1 is attracted as per the provision of “section 104-25 (1)”. The receipt of the insurance
amount as shown in the case attracts CGT event C1 which needs to be considered by the
taxpayer while computing the taxable income of the taxpayer.
Part C: Paintings
As per the case which is provided in the assessment, the taxpayer acquired a painting
which had initially cost her $ 2000 on 2nd May 1985 and the same was sold for $ 1,25,000 in the
current tax year. The provisions of applicability which are set out in CGT rulings states that the
tax will be applicable on and from 20th September 1985. In such cases the assets are usually
considered to be exempt from taxation as the tax ruling was not in force at that time.