Taxation Law

This document provides an analysis of various cases related to taxation law. It discusses the determination of CGT consequences for the sales of different assets, the classification of income from personal exertion, and the assessability of certain receipts. The document also includes references to relevant court cases and provisions of the ITAA.

Running Head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note

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Table of Contents
Question 1........................................................................................................................................3
Part 1............................................................................................................................................3
Part 2............................................................................................................................................4
Part 3............................................................................................................................................5
Part 4............................................................................................................................................5
Question 2........................................................................................................................................6
Part 1............................................................................................................................................6
$13000..........................................................................................................................................7
$13400..........................................................................................................................................7
$4350............................................................................................................................................8
$3200............................................................................................................................................8
Part 2................................................................................................................................................8
Question 3........................................................................................................................................9
Application......................................................................................................................................9
Conclusion.....................................................................................................................................10
Reference List................................................................................................................................11

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Question 1
Part 1
In this case the issue is determination of the monetary gain consequences by the sales of the
antique painting by Helen.
This painting can be considered as a collectible item as well as an asset for capital gain according
to the conditions of section 108-10(2) ITAA97. According to the statements of section 102.2,
CGT will be in card only if there is any CGT event according to the provisions of section 104-5.
Sales of any CGT asset as well as the disposal of the same will be considered as CGT event A1
according to the provisions of section 104-10(1). The concerned timing of acquisition of the
Asset is when the ownership lies with the taxpayer, according to the provisions of the section
109-5(1).
The statement of the facts makes it and clears whether Helen had acquired the painting. The
reason is that the actual purchase was made by Helen’s father. In case is the purchase was made
before 28 September in 1985, it might be exempted from CGT as in that case it will be
considered as a pre CGT asset (Barkoczy 2016). Again, if the acquisition was done after that
specified date, then that asset will be considered to be collectible. As per the provisions of
section 110-25(2) element one, the cost base will be the acquisition price, that is 4000 US
dollars. However, since Helen could have acquired the Asset by means of death or as gift, there
will be a modification in the cost base depending on the market valuation during the time of
acquisition according to the section 112-20. In this case, the capital proceeds will be fixed at the
sale price of 12000 US Dollars according to the section 116-4.20. The capital gain will be
calculated after reducing the cost base from the capital proceeds. In case if the Asset had been

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under his ownership for over a year, she will get the benefit of 50% discount on that asset
according to the division 115.
Part 2
In this case the problem is determining the CGT consequences against the sales of the historical
structure by Helen.
The structure which Helen sold is a collective item and there is an associated capital gain asset
according to the solutions of section 108-10(2) ITAA97 (Sadiq et al. 2012). According to the
provisions of section 102.2,sales or disposal of any CGT asset will be determined as CGT event
A1 according to the provisions of the section 104-10(1). The concerned timing of acquisition of
the Asset is when the ownership lies with the taxpayer, according to the provisions of the section
109-5(1).
In this case the timing of transaction is December of 1993 which makes it a transaction in the
post CGT time period which makes it a post CGT asset along with its disposal, a CGT event A1
ACCORDING to the provisions of section 104-10(1) (Sadiq et al. 2012). In this case, according
to the section 110-25(2) element one, the cost base will be same as the acquisition price of
$5,500. The selling price of 6000 US dollars will be same as capital proceeds in this case as per
the provisions of section 116. 20. The capital benefit in this case will be the value after deduction
of cost base from capital proceeds. This means that the entire capital benefit for this sale
achieved by Helen will be the value after deduction of 5500 from 6000, which makes the total
capital gain of $500. As an outcome, it is evident that she will be applicable for the 50% discount
according to the provisions of section 115. 10 and as an individual she has been holding the

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Asset more than 1 year according to the section 115-15and it is evident that the acquisition was
done after the month of September in 1999 according to the section 115-25 (Sadiq et al. 2012).
Part 3
In context to this case determination of CGT consequences of the Antique jewellery pieces is to
be determined.
The Antique jewellery put under sales by Helen can be considered as a connective item as well
as capital gain asset according to the provisions of section 108-10(2) ITAA 97. As provided by
section 102.2, CGT imposition will only take place when there is any CGT event according to
the provisions of the table highlighted in section 104-5. Sales or disposal of any CGT asset will
be considered as a CGT event A1 provided by section 104-10(1) (Woellner et al. 2010). The ideal
timing for acquisition of the asset is when the ownership belongs to the taxpayer according to the
provisions of section 109-5(1). Acquisition timing in this case is October of 1987 which implies
that the jewellery piece can be considered to be post CGT asset and the disposal of that asset will
be CGT event A1 according to the section 104-10(1). In this case, based on the provisions of the
section 110-25(2), the cost base of this item can be considered as the acquisition price of 14000
US dollars. Again, the value of the sell price that is 30,000 US dollars will be considered as
capital proceeds under the provision of section 116.20 (Woellner et al. 2010). The CL will be
determined in this context by deducting the cost base from the capital proceeds. Total CL
valuation is 1000 US dollars. The loss is only reversible against the CL gain, rather than the GC
gained from normal assets. However the loss volume can be projected in the following year also.
Part 4

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The primary concern in this case is determination of CGT consequences of the picture that Helen
had sold.
This is a collectible item as well as capital gain asset as provided by section 108-10(2) ITAA97.
In this case, as represented by the section 102.2, CGT imposition will only take place when there
is any CGT event according to the provisions of the table highlighted in section 104-5.According
to the provisions of section 102.2, sales or disposal of any CGT asset will be determined as CGT
event A1 according to the provisions of the section 104-10(1). The concerned timing of
acquisition of the Asset is when the ownership lies with the taxpayer, according to the provisions
of the section 109-5(1).
The statement of facts does not make it clear whether Helen had acquired the painting. The
reason is that her mother purchased it. In case if the painting was required after the date of 20th
November 1985, it will be considered as collectible item. In this case, according to the section
110-25(2), element one, the cost base will be fixed at the acquisition price of 470 US dollars.
Nevertheless, since Helen acquired the Asset by means of death or as gift, the cash benefit
undergoes modification according to the provisions of market value of the contemporary period
of acquisition as provided in section 112-20 (Barkoczy 2016). According to the section 116.20,
the capital proceeds in this case will be of the same value as that of the sales price of $5,000. The
determination of capital gain will be done by deduction of the value of cost base from that of
capital proceeds. If the Asset was being sold by her for over and here, she will be eligible to
receive 50% discount for that asset according to the division 115.
Question 2
Part 1

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In this case the issue is regarding determination of whether the receipt made by Barbara can be
deemed as income from personal exertion, as for the stated facts.
Income generated from personal exertion has been articulated in the ITAA36, section 6-1
(Barkoczy 2016). However, the definition against income from personal exertion, provided here is
very broad and hence cannot be utilised for categorising the receipt made by Barbara. Hence,
case laws need to be referred in this case. As directed in the court case of Hayes vs. FCT 1956, it
was provided that income from received should be ordinary income since it is income generated
from personal exertion. That is why it will be segregated as reward or outcome from a initiative
for generating income.
$13000
To state in simple way, there is supposed to be enough nexus in relation with the services
provided as well as the receipt of income. Any bulk payment towards one independent contractor
will be considered as OI since it is generated from the provision of personnal services. Therefore,
as Barbara was provided with $30,000 for writing the book and since she is one independent
contractor, the receipt will be considered to be income generated from personal exertion. In the
court case of Brent vs. FC of T (1971) ATC 4195, the same proposition has been provided by the
court also (Barkoczy 2016).
$13400
Barbara received 13400 US dollars from the sales of copyright to the Eco books. Giving up the
rights can be regarded as activity for capital receipt. In the court case of Brent vs. FC of T (1971)
ATC 4195, we find an articulation of the same concept. The Court provided that when the
copyright was assigned by the taxpayer, it can be considered as capital receipt only. In this case

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also, we find Barbara assigning her copyrights and that is why it will be considered as an activity
for capital receipt rather than income generated from personal exertion.
$4350
Income generated from selling book manuscript will also be considered to be income generated
from personal exertion. This can be commented as the same outcome has been observed in the
case of Hobbs vs. Hussy (1942) TC 153. In this case, the court validated sales of rights in context
to the autobiography, as an assessable income. This is also valid in this case for the fact that
Barbara conducted this activity in order to generate profit.
$3200
The income earned from selling interview manuscript can be considered as income generated
from personal exertion. This suggestion has been derived on the basis of the outcome of the case
ofHobbs vs. Hussy. In this case, the court validated sales of rights in context to the
autobiography, as an assessable income.This is also valid in this case for the fact that Barbara
conducted this activity in order to generate profit.
Part 2
The issue in this case is determination of the kind of receipt made by Barbara, in case, the book
was written by her utilising her spare time.
According to the section 6-5, income only in corporates receipts generated from ordinary heads
income. In order to concept the receipt as income, there should be a minimum intention of profit
generation. The same thing has been clarified by the taxation ruling 97/11 (Barkoczy 2016). It has

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been stated that Income which is generated from hobby cannot be considered as assessable
income.
Therefore in case the book was written during the spare time, there should not be any intention of
generating profit or Nexus between the services provided as well as the amount of capital benefit
made by her. So, this will be considered as income generated from a hobby and not considered as
assessable income. She will not be considered to be executive any business activity as her
intentions do not satisfy the factors provided against any activity to be considered as business,
according to the taxation ruling 97/11.
Question 3
The issue in this case is identification of the fact whether the amount that was repaid by the son
with additional 5% can be considered as assessable income or not.
In the court case of FC vs. Whitfords Beach Pty Ltd (1982) ATC 4031, it has been considered by
the court that win any person is involved in on-off transaction with intention of generating profit,
the receipt from the transaction can be considered as income for the TP. In the court case of
Lomax vs. Peter Dixon, it was clearly stated by the court that interest granted against the original
amount will be accepted as ordinary income for any taxpayer.
The court case of FCT vs. Myers Emporium Limited also upholds the same description. The first
stand taken in this context, shows that any transaction which was intended for profit generation
will be considered as income for the taxpayer.
Application

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It has been presented clearly with facts that the father has provided a loan to the son. In relation
to the amount, did not make any claim for interest, although. However, it was promised by the
son that additional amount will be payable along with the principal value after the loan period
ends. This implies that there was intention of generating profit from the end of the father at the
time when the loan was provided. The outcome would have been different if there was no
additional payment involved with the repay of the loan. The loan was repaid on an earlier date
along with provision of 5% additional money compared with the original value of the loan. The
extra volume of money can be considered as income generated by the father. Similar
consequences can be observed in the court case involving Whitfords Beach Pty Ltd. The
consequence is that when the person was involved into an on-off transaction, with the purpose of
generating profit, the transaction receipt will be taken as an income for the taxpayer. In addition
to that, the receipt also aligns with the first stand taken in the Myers case. The additional 5%
value which the son provided to the father will be considered as assessable income generated by
the father.
Conclusion
The additional 5% value which the son provided to the father will be considered as assessable
income generated by the father.

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Reference List
Barkoczy, S., 2016. Foundations of taxation law 2016. OUP Catalogue.
Brent v FC of T (1971) ATC 4195
FC of T v Whitfords Beach Pty Ltd (1982) ATC 4031
Federal Commissioner of Taxation v Myer Emporium Ltd (No 1). [1986] HCA 13
Hayes v FCT 1956
Hobbs v Hussy(1942) TC 153
Income Tax assessment Act 1936 (Cth)
Income Tax assessment Act 1997 (Cth)
Sadiq, K., Coleman, C., Hanegbi, R., Hart, G., Jogarajan, S., Krever, R., McLaren, J., Obst, W.
and Ting, A., 2012. Principles of taxation law 2012. Thomson Reuters.
Woellner, R.H., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2010. Australian taxation
law. CCH Australia.