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HI6028 Taxation Theory, Practice & Law - Holmes

9 Pages2535 Words156 Views
   

Holmes Institute Sydney

   

HI6028 Taxation Theory, Practice & Law (HI6028)

   

Added on  2019-10-30

HI6028 Taxation Theory, Practice & Law - Holmes

   

Holmes Institute Sydney

   

HI6028 Taxation Theory, Practice & Law (HI6028)

   Added on 2019-10-30

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TAXATION LAW
HI6028 Taxation Theory, Practice & Law - Holmes_1
Taxation lawAnswer-1It can be seen in the given case that Eric has bought some assets since the last year and because the given case does not mention an appropriate time for holding of such assets, it can be presumed that the same has been held for less than a year.Whenever the sale consideration of a specific asset exceeds its cost base, the taxability of capital gain arises and since in the given case, the assets are presumed to be held for less than a year, indexation benefit shall not accrue upon Eric. Eric has bought the following assets in the last year. Firstly, he has acquired assets for his own use excluding collectibles. These assets consist of a home sound system with an acquisition cost of $12,000. Besides, based on the law, if the acquisition cost of personal use assets is less than $10,000, then taxability of capital gain does not incur. Secondly, Eric has bought few collectibles that are usually to address his own benefits and enjoyment. Such collectibles consist of an antique chair with an acquisition cost of $3000, painting with an acquisition cost of $9000, and an antique vase with an acquisition cost of $2000 respectively. Besides, based on the law, if the acquisition cost of such assets does not exceed $500, then taxability of capital gain does not incur upon the transaction. Lastly, Eric has also bought few shares in a listed company for an acquisition cost of $5000 that attracts capital gain tax according to the law (Sadiq et. al, 2017). Nonetheless, in order to compute taxability of capital gain for the assets held for less than a year, the acquisition cost of such assets can be deducted from their capital proceeds that can derive the net capital gain or loss for the year (Kobestky, 2005).(Amounts in dollars)AssetsAcquisition cost of the assetsNet Capital ProceedsNet Capital Gain or LossHome Sound System12,00011000(1000)Painting9,0001000(8000)Antique Vase2,00030001000Listed company’s shares5,0002000015000Antique Chair3,0001000(2000)Net Capital Gain5000Therefore, it can be seen from the above computation that the net capital gain in relation to Eric comes to $5000 and the same is liable to be paid by him respectively.2
HI6028 Taxation Theory, Practice & Law - Holmes_2
Taxation lawIn relation to the previously mentioned computation, many points must be taken into account. Firstly, every personal asset bought by Eric have been purchased at an acquisition cost of more than $10,000 and that is why they are applicable for taxability of capital gain. Secondly, the collectibles bought by Eric have also been bought for an acquisition cost of more than $500 and that is the reason why these are taken into account for computing net capital gain or loss for the year (Pratt & Kulsrud, 2013). Lastly, the net capital gain of $5000 has been derived by setting offthe capital losses from the capital gain in the particular year.3
HI6028 Taxation Theory, Practice & Law - Holmes_3

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