Taxation Law: Capital Gain Tax Consequences and Income from Personal Exertion

Running head: TAXATION LAW
TAXATION LAW
Name of Student
Name of University
Author Note

1TAXATION LAW
Table of Contents
Question 1........................................................................................................................................2
Issue.............................................................................................................................................2
Rule..............................................................................................................................................2
Application..................................................................................................................................3
Conclusion...................................................................................................................................4
Question 2........................................................................................................................................5
Issue.............................................................................................................................................5
Rule..............................................................................................................................................5
Application..................................................................................................................................6
Conclusion...................................................................................................................................6
Question 3........................................................................................................................................7
Issue.............................................................................................................................................7
Rule..............................................................................................................................................7
Application..................................................................................................................................8
Conclusion...................................................................................................................................8
Reference.........................................................................................................................................9

2TAXATION LAW
Question 1
Issue
Four different issues all relating to the consequences of the Capital Gain Tax effecting s a
result of Helen’s transactions for financing her business can be seen to be arising in this case.
These issues can be said to be arising because of the transactions made by Helen for the finance
of her fashion designing business. The issues are as follows-
 Capital Gain Tax consequence of an antique impressionism painting that was purchased
by Helen’s father in February 1985 for $4,000 and sold by Helen for $12,000 1st
December 2018.
 Capital Gain Tax consequence of an historic sculpture that was purchased Helen on
December 1993 for $5,000 and sold on 1st January 2018 for $6,000 by her
 Capital Gain Tax consequence of an antique jewellery that was bought on October 1987
for $14,000 and sold by Helen on 20th March 2018 for $13,000
 Capital Gain Tax consequence of a picture that Helen’s mother bought for $470 in March
1987 which was sold by Helen on 1st July 2018 for $5,000.
Rule
It is mentioned in the section 102.20 of the Income Tax Assessment Act 1997 that on the
occurrence of the Capital Gain Tax events the capital gain or loss can be incurred (Harding,
2013). The sale of capital gain tax assets can be treated as a Capital Gain Tax event under the
category A1 of the section 104.10 of the Income Assessment Act 1997. However under this

3TAXATION LAW
provision the applicability of the Capital Gain Tax will only be effective on the Capital Gain Tax
assets acquired after 20th September 1985. Any asset that has been acquired prior to the
mentioned date would be treated as Capital Gain Transaction exemption and not treated under
the provisions of the Capital Gain Transaction (Adeyemi and Babington-Ashaye 2015).
The term ‘collectible’ is defined in the section 108.10 (2) of the Income Tax Assessment
Act 1997 as an item owned for the personal use and enjoyment of a taxpaying person. In this
section a collectible can be described as any artwork, jewellery, rare folios and any other thing of
the same nature. A collectible can also be described as interests, debts or rights to any other
objects mentioned. Under the section 118.10 of the Act a collectible cannot be taxable if it was
sold at a rate less than $500.
Application
In the first issue an ancient impressionism painting that was bought by Helen’s father on
February 1985 for $4,000 can be seen to be sold by Helen at $12,000 on 1st December 2018. As
Capital Gain Tax application under the provisions of section 104.10 is only possible on the CGT
assets bought after the date of 20th September 1985. Under the provisions of the section any asset
that has been acquired before the mentioned date would be considered as Capital Gain Tax
exemption. In the second issue it can be seen that on 1st January 2018 Helen sold a historical
sculptor for $6,000 that was bought by her on December 1993. As the asset was acquired for an
amount that exceeds $500 this collectible can be classified as taxable capital asset under the
section 118.10 (1). Section 110.10 provides that if any collectible is bought under $500 it would
be considered as Capital Gain Transaction exemption.