Taxation Law: Capital Gains Tax, Fringe Benefit Tax, and Interest on Loan

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Answer to question 1:
Answer A Vacant Land:
A holder of the vacant land is accountable for income tax when the disposal of land
give rise to gains that are taxable as the capital gains. The vacant land which a taxpayer holds
as the capital asset will attract the same rules of capital gains tax as the other properties are
held for assessment. A person that holds the vacant land should keep the records of the date
when the land was acquired and the cost that is incurred in getting the land (Atkinson 2016).
The holder of vacant land should also include the records of ongoing expenditure such as
council rates and interest loan.
The holder of land cannot claim the deductions for the above stated expenses because
no income was generated from the land. In its place the holder of vacant land can add these
expenses in the cost base of the land for calculating their capital gains or loss when the land is
sold (Roberts 2017). A contract to sale the empty land at $320,000 has been entered in the
course of the year. The client acquired the land in January for $100,000 and incurred ongoing
expenses of council rates water and sewage. Citing “Sara Lee Household v FC of T (2000)”
the change in ownership and sale of land gave rise to CGT event A1 (McNulty and McCouch
2015). The capital gains made from the sale of vacant land will be taxable under section
(104-10(1)).
Answer B: Antique Bed:
In course of the present year the antique carrying the worth of $25,000 was stolen.
The client reports the receipt of compensation from the insurance company of $11,000 since
the antique was in the list of specified items in the client’s insurance policy. Under the quoted
“s-104-10(1)” there was the rise of CGT event C 1 when the antique bed was stolen (De la
Feria 2017).

2TAXATION LAW
The client in the current case reports the receipt of compensation from the insurance
company for the loss of stolen antique bed. The compensation can be characterised as the
CGT event C1 under (s 104-0(1)) since the CGT asset that the client owned is lost.
Answer to C Sale of Painting:
The concept of capital gains tax began on 20 September 1985 and introduces the
capital receipts into the tax base. CGT operates only when the CGT event takes place that
involves the CGT asset purchased on or after the 20/9/1985 (Drautzburg and Uhlig 2015).
There is an exception to this rule if the CGT asset was purchased before the 20/9/1985. Asset
purchased before CGT was introduced is not treated for CGT purpose.
During the month of May in the year of 1985 a painting valued $2000 was reported by
the client. As the painting was acquired before the introduction of CGT on 20/9/1985. For
that reason, there will be no taxable capital gains for the painting. The painting is the asset of
Pre-CGT nature and omitted from CGT.
Answer to D: Shares
Whenever there is a sale reported by the taxpayer for the shares held by them there
will be a CGT event. Shares constitute the nature of the CGT asset (Sheshinski 2015). But it
should also be noted that if there is any form of loss upon the disposal of shares then these
loss from the shares are set-off when there is capital gains reported by the taxpayer.
After making gains in the shares that was held by the taxpayer there was also the
event where capital loss was reported from the young kids learning shares. Nonetheless there
was the capital loss when the taxpayer sold the shares of young kids. Conferring to such loss
an offset from the capital gains is easily claimable. .

3TAXATION LAW
Answer to E: Violin:
As per (s 108-20 (2)) the personal use asset is defined as the asset that is kept or used
for private purpose and enjoyment, except the land and building. The examples include the
television, mobile phone for private use, yacht for personal enjoyment and bicycle (Baldry
2017). There are special rules applicable to personal use asset such as capital gains and loss
must be disregarded when the first element of the personal use assets cost base is lower than
$10k.
The client reports in the current tax year the sale of violin for $12,000 that was
originally acquired for $5,500 on 1st June 1999. The capital gains made by client from the
sale of personal use assets must be ignored under the first element of special rules as the cost
of personal use asset is below the cost of $10k.