Tax Calculation for Investment Property, Partnership and Trust Income

This article provides a detailed calculation of tax for investment property, partnership and trust income. It includes sections on CGT event, cost base, net capital gain, partnership profit or loss, net income allocation, trust income assessment, dividend calculation and tax payable.

Running head: TAX
Tax
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Answer to Question 1.................................................................................................................1
Answer to Question 2.................................................................................................................3
a).............................................................................................................................................3
c).............................................................................................................................................3
d)............................................................................................................................................4
e).............................................................................................................................................4

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Answer to Question 1
The section 100-20 of the ITAA 97 states that CGT event occurs from the sale of
CGT assets are sale of investment property, real estate property and sales of shares.
The costs associated with acquisition and disposal are included in cost base as per
section 110-25(3) of ITAA 97.
The cost of $250000 incurred for renovation the property will be added to the cost
base of the property as per the section 110-25(4).
The capital gain or loss is calculated as per section 100-45 of the ITAA 97.
Statement showing calculation of Capital gain
Particulars Amount Amount
Real estate property $950,000.00
legal fees $4,500.00
real estate agent commission $45,000.00
Selling and distribution $2,500.00
Net capital proceeds $898,000.00
Cost of the property $350,000.00
legal fees $1,500.00
Stamp duty $9,500.00
cost of renovation $250,000.00
Cost base $611,000.00
Gross capital gain $287,000.00
Less:
Discount @ 50% 143500.00
Net capital gain $143,500.00
Loss on sales of investment property $180,000.00
Capital gain on sales of shares $225,000.00
Total Net capital gain $188,500.00

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Answer to Question 2
a)
The taxation Ruling 2005/7 under para 7 provides that in calculating the partnership
profit or loss the salary paid to partners are not allowed as deduction.
Calculation of Net Income
Particular Amount
Profit of partnership $325,000.00
Wages of partner $150,000.00
Net Income $475,000.00
b)
The net income received by a partner from the partnership is included in the
assessable income of a partner under section 92(1) of the income tax assessment act 1936.
Net income allocation to each partner
Particulars Amount
Net Income $475,000.00
share proportion 50%
Net income allocated to partner $237,500.00
c)
The income of the trust is assessed in the hands of the beneficiary as per section 97-1
of the Income Tax Assessment Act 1997. The trust has distributed $170000 to Maria this
amount should be included in the assessable income of Maria.
d)
The income received by the trust should be included as the normal assessable income.
The tax rate that will be applicable is the general rate.

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e)
Calculation of dividend
Particulars Amount
Dividend received $135,000.00
Gross dividend $190,812.72
Section of dividend taxed $55,812.72
f)
Calculation of Tax payable
Particular Amount
Net Income from partnership $237,500.00
Dividend Income $135,000.00
Total Assessable income $372,500.00
Tax payable $140,857.00
Franking credit $55,812.72
Net Tax payable $85,044.28

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