Taxation Law

Running head: TAXATION LAW
Taxation Law
Name of the Student
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1TAXATION LAW
Table of Contents
Answer to question 1..................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Application:............................................................................................................................3
Conclusion:............................................................................................................................4
Answer to question 2:.................................................................................................................4
Issues:.....................................................................................................................................4
Rule:.......................................................................................................................................4
Application:............................................................................................................................6
Conclusion:............................................................................................................................7
References:.................................................................................................................................8

2TAXATION LAW
Answer to question 1
Issues:
Is the taxpayer liable for the capital gains tax resulting from making the sale of CGT
asset under “section 104-10(1), ITAA 1997”?
Rule:
As per the “section 108-5(1), ITAA 1997 CGT” assets include the any type of
possessions or lawful or equitable rights which is not in the form of property. The examples
includes the land and buildings, business goodwill, contractual rights etc. As defined under
“section 104-25(1) a CGT event C2” take place when the proprietorship of the intangible
assets of a taxpayers comes to an end through cancellation or expiration (Barkoczy, 2014). It
also includes the time when the taxpayers enters into the contract of ending the asset.
According to ATO a CGT event C2 happens when there is permanent cessation of business.
The decision of court in “Muller & Co Margarine Ltd v IRC (1901)” stated that goodwill is
reliant on the trade nature. Any capital gains derived upon the sale of business goodwill must
be incorporated in the taxable earnings.
Payments received for surrendering or limiting the rights is not an earnings. This
includes the compensation obtained for agreeing not to do something. As held in “FCT v
Dickenson (1958)” payment received by taxpayer to sell only products of shell for a period of
next ten years and for next five years to sell the shell products inside the radius of 5 miles
was not held as income (Grange et al., 2014). However, under “section 104-35(1) a CGT
event D1” occurs when a taxpayer enters into the contractual rights in another entity. For
instances, contractual right of restraints of trade is entered into by the taxpayer to agree not to
operate a similar business inside the particular radius or agrees to enter into an exclusive
trading agreements.