Sale of Land 4 Answer to Question 1: 2 Answer to Question 2: 6 Answer to E: 8 Answer to F: 8 Answer to E: 8 Answer to E: 8 Answer to F: 8 Answer to E: 8 Answer to E: 8 Answer to E: 8 Answer to E: 8 An

LAWS OF TAXATION LAWS OF TAXATION LAWS OF TAXATION 108-10 10 LAWS OF TAXATION Name of Student Name of University Author note Word count Answer of question 1: 2 Answer A: Sale of block of land 2 Answer B: Sale of shares 4 Answer C: Sale of Stamp Collection 4 Answer D: Sale of Guitar 5 Answer to question 2: 6 Answer to A: 6 Answer to B: 6 Answer to C: 7 Answer to D: 7 Answer to E:

Running head: LAWS OF TAXATION
LAWS OF TAXATION
Name of Student
Name of University
Author note
Word count

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Table of Contents
Answer of question 1:................................................................................................................2
Answer A: Sale of block of land................................................................................................2
Answer B: Sale of shares...........................................................................................................4
Answer C: Sale of Stamp Collection.........................................................................................4
Answer D: Sale of Guitar...........................................................................................................5
Answer to question 2:.................................................................................................................6
Answer to A:..............................................................................................................................6
Answer to B:..............................................................................................................................6
Answer to C:..............................................................................................................................7
Answer to D:..............................................................................................................................7
Answer to E:...............................................................................................................................8
Answer to F:...............................................................................................................................8
Answer to G:..............................................................................................................................8
Answer to H:..............................................................................................................................9
References................................................................................................................................10

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Answer of question 1:
Answer A: Sale of block of land
Five elements are basically included in the cost. As mentioned under “sect-110-25
(2)” the first elements includes property paid or the money paid to obtain an asset. “Sect-110-
35” describes second element of cost which includes incidental costs which includes legal
fees, stamp duty etc. The third elements includes the cost of ownership which involve
ownership costs, land taxes, insurances and interests (McCluskey and Franzsen, 2017). As
mentioned under “sect-110-38”, the fourth element includes the cost of preservation and
capital improvement. Improvement, installation expenses and moving expenses are the
example of this type of cost. Capital improvement in maintaining the title rights of assets are
included under the fifth elements of the cost. Under “sect-110-45” includes the examples of
this cost which includes the cost which has occurred in acquisition of land by government
(O’Connell, 2017).
In the current situation, Sophia has reported that she sold a land for $800,000 which
she purchased for $130,000 in the year 1991. To ascertain the CGT of the land, the
acquisition cost of the asset must be understood. “Sect-110-25 (2)” describes that this
acquisition cost includes the cost of asset which is included in the purchase price paid by
Sophia on acquisition. Sophia also paid legal fees $1,200 and stamp duty for $800. “Sect-10-
35” describes that these type of cost are to be classified as incidental cost and therefore
Sophia should include the incidental amount in the cost base of the asset (Collier et.al, 2018).
Sophia also had a bank loan which she paid interest of $27,000 in order to purchase
the property. Sophia paid a water rates, council rates and insurance of $18,500 when she
owned the property. This type of expenses must be classified as property ownership cost and
hence she should add it in the cost base to calculate the net capital gains as noted under “sect-

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110-36”. Sophia also had a dispute with her neighbour for which she paid legal fees worth
$8,000.
As mentioned under “sect-110-25 (6)”, this cost should be classified under fifth
element cost base which will be used to establish the cost of the property. Sophia also
reported that she also had an expense to remove pine trees from the property which was
hazardously presented there and it is a capital expenditure as mentioned under “sect-110-25
(5)” and the taxpayer has occurred the expenses which increased the asset value therefore,
Sophia should include the expenditure under her cost base (Barkoczy, 2016).

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Answer B: Sale of shares
CGT provisions are applied to assets which is purchased following 20th September
and it is generally used to evaluate the value of asset. “Pre CGT” and “Post CGT” is used in
reference to asset purchased before or after the following date (Huizinga, Voget and Wagner,
2018).
In the year 1981, Sophia purchased shares in ABC Co at $1.50 per share and in the
current tax year, Sophia decided to sale the shares for $32.20 per share. This share are
classified as “Pre CGT asset” (Barros, Teo and Hinchliffe, 2016). The capital gains from the
sale of assets will not be included in her taxable income as the shares are purchased before
20th September 1985.
Answer C: Sale of Stamp Collection
Collectables are defined as the items which the taxpayer keeps for personal enjoyment
and purpose as mentioned under “sect-108-10 (2)”. The examples of this type of asset
includes rare books, antiques, art works. As mentioned under “sect-108-10 (1)”, the capital
loss from selling this type of asset should be used to set-off the capital gains from collectables
(Lawrence, 2019).

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In the year 2018, Sophia purchased a stamp in the month of January for $33,000
which she sold in the current year for $23,000. This stamps must be observed as CGT asset
under “sect-108-10 (2)” and she must state the there was a capital loss from the sale of
stamp. The capital loss from the sale of stamp should be set-off against the capital gains
derived from other collectables as noted under “sect-108-10 (1)”. No other loss from
collectables or capital gains has been reported by Sophie in the current year (Chung, 2017).
Answer D: Sale of Guitar
“Personal use Asset” is those type of asset which is not treated as collectable hence
kept for personal purpose and enjoyment by the taxpayer (Warmock, 2016). This definition
of personal use asset is provided under “sect-108-20”. Some examples of collectables are
furniture, race horse, electrical goods and household goods. The capital loss from the sale
personal use asset should be ignored by the taxpayer under “sect-108-20 (1)”.
Sophia purchased a guitar for $70,000 and sold it for $45,000 hence she suffered
capital loss. This guitar is personal use asset as mentioned under “sect-108-20” and the loss
from the sale of guitar should be ignored by Sophia as noted under “sect-108-20 (1)”.

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Answer to question 2:
Answer to A:
Under “section 8-1”, any expenses of loss that is linked with income generating
activity should not be treated as ordinary income and it should be considered for deductions
under this law. Any expenditure which is occurring in recruiting new employees should not
be taxable under this legislation. Notable mention with reference to “Maddalena v FCT
(1971)”, travelling expenses occurred by the football player and contractual expenses to other
club should be rejected (Burton, 2018).
In the scenario, Ava travelled to attend a job interview at sunshine hospital therefore
travelling expenses occurred in the same should be treated as preliminary expenses in income
generating activity and should not be included under ordinary income (Baker, 2016). Under
“section 8-1”, this type of expenses should not be allowed for deductions mentioning
“Maddalena v FCT (1971)”.
Answer to B:
Under “section 8-1 (2) (b) ITAA 1997” noted that the private or domestic outgoings
are not allowed for deductions under this law. The expenditure of taxpayer on shifting his
family to a new house in another city for relocation of job will not be allowable under tax

7LAWS OF TAXATION
deduction as the amounts are domestic as mentioned by the federal court in “Fullerton v
FCT (1991)”.
Ava reported to shift her house to Darwin which cost $1,800. Mentioning the
judgement of “fullerton v FCT (1991)” noted that this relocation expenses is private
arrangement and is fails to meet the positive deduction under “section 8-1 (2) (b) ITAA
1997” and it should not be permitted for deduction under this section (Brownlee, 2016).
Answer to C:
Taxpayer’s expenses for ordinary objects should not be allowed for general tax
deductions with provision under “section 8-1”. However, the taxpayer are allowed for certain
exceptions for compulsory clothing which is a specific and protective uniform. The taxpayer
are allowed for deduction relating to cost of shoes and expenses on stockings as it is
necessary that these costs should be levied by the taxpayer while working her job of flight
attendant (Woellner et.al, 2016).
Ava also paid $200 for doctor’s uniform and the expenses that is occurred towards
this amounts to specific clothing of AVA. “FCT v Mansfield (1995)” mentioned that these
expenses are allowable for tax deduction under “section 8-1 ITAA 1997”.
Answer to D:
In the current year, Ava has also occurred child care expenses for her two year old
daughter which amounts to $18,200. “Lodge v FCT (1972)” described that the claim of the
taxpayer for assessable earnings are expenses related to childcare. This should not be
included in the income generating activities of the taxpayer and therefore the outgoings will
not be treated as assessable income and there will not be any deduction under “section 8-1
ITAA 1997”.

8LAWS OF TAXATION
Answer to E:
Any expenses associated with phone rental or phone call should be allowable under
deduction if the taxpayer has evidence of the call or the call was made to the employer or
clients during the work. “Ronpibon Tin No Liability v FCT(1949)” mentioned that these
expenses related to work purpose is allowable for tax deduction should give positive limbs
noted under “section 8-1 ITAA 1997”
Ava also incurred expenses on phone call while she was away from her hospital in her
work hour to look after the patient. The cost of the phone call costs $200. As mentioned by
“Ronpibon Tin No Liability v FCT (1949)”, the expenses of phone call should be
permissible for deduction under “section 8-1 ITAA 1997”.
Answer to F:
There are certain situation where the taxpayer occurs with expenses that are related to
human being such as food, clothing or housing. This type of expenses are not allowable under
“section 8-1 ITAA 1997”. “FCT v Cooper (1991)” judged that the outgoing that is occurred
by rugby player on having food is non-deductible under positive limbs as mention under
“section 8-1 ITAA 1997”.
Ava also reported that she consumed food while working in the evening shift. Under
“section 8-1 ITAA 1997”, the food expenses is not deductible under this section as it fails to
meet the criteria of deduction. This section also stated that these expenses are outgoings and
it will not be non-deductible.
Answer to G:
Under “section 26-5 ITAA 1997” noted that fines which are imposed by the
government of Australia is non-deductible. Ava also reported a speeding fine worth $207

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while she was going for work. “Section 26-5 ITAA 1997” describes that the fines are non-
deductible to Ava.
Answer to H:
Outgoings are not allowable for deduction under “section 8-1 ITAA 1997” as it
occurred between home and place of work of taxpayer. “FCT v Lunney (1958)” mentioned
that the outgoings associated with work and travel of the taxpayer will not be permissible for
deduction as it is not generating any earnings and the outgoings are private in type (Zhu,
2019).
In the current scenario, Ava occurred travel outgoing for $330 to and from work.
Notable mention of “FCT v Lunney(1958)” described that the outgoing relating to work is
non-deductible as the deduction is private and Ava will not be provided with any taxable
deduction under “section 8-1 ITAA 1997”.

10LAWS OF TAXATION
References
Baker, D.A., 2016. The Great Tax Policy Debate: For Retention or Reform of the Preferential
Taxation of Capital Income.
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Barros, C., Teo, E.J. and Hinchliffe, S., 2016. Clash of the deeming provisions: Pre-CGT
concessions, tax consolidation and policy in the federal court. Austl. Tax F., 31, p.509.
Brownlee, W.E., 2016. Federal Taxation in America. Cambridge University Press.
Burton, M., 2018. Interpreting the Australian Income Tax Definition of Ordinary Income:
Ritual Incantation Or Analysis, When Examined through the Lens of Early Twentieth
Century Linguistic Philosophy. eJTR, 16, p.2.
Chung, E., 2017. The absolute beginner's guide to capital gains tax. REIQ Journal, (May
2017), p.35.
Collier, P., Glaeser, E., Venables, T., Blake, M. and Manwaring, P., 2018. Land and property
taxes for municipal finance.
Huizinga, H., Voget, J. and Wagner, W., 2018. Capital gains taxation and the cost of capital:
Evidence from unanticipated cross-border transfers of tax base. Journal of Financial
Economics, 129(2), pp.306-328.
Lawrence, S., 2019. Separate SMSFs for collectables. Taxation in Australia, 53(9), p.480.
McCluskey, W.J. and Franzsen, R.C., 2017. Land value taxation: An applied analysis.
Routledge.
O’Connell, A., 2017. Australia. In Capital Gains Taxation. Edward Elgar Publishing.

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Warnock, R., 2016. MNAV test: Asset and liability issues. Taxation in Australia, 51(3),
p.133.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.
Zhu, L., 2019. Thoughts on the Deduction of Individual Income Tax Expenses. DEStech
Transactions on Social Science, Education and Human Science, (esem).