Taxation Law

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Answer to question 1:...................................................................................................2
Answer to question 2:...................................................................................................3
Answer to question 3:...................................................................................................5
References:..................................................................................................................7

2TAXATION LAW
Answer to question 1:
Capital gains from antique impression painting:
Capital gains tax is not the separate tax. The regime of capital gains tax is
integrated into the income tax system (Friezer 2014). The most important rule of the
capital gains tax is that it is applied on the assets that are purchased on 20/9/85.
Assets that is purchased before this dates are simply ignored or exempted from the
capital gains tax.
Helen here reports that she has an antique impression painting that was
bought in February 1985. The painting cost was $4,000 but was sold for $12,000.
The disposal of painting has resulted in the capital gains for Helen. Most notably the
painting was bought before the capital gains tax regime was introduced or in other
words it was bought before 20/9/85. The capital gains that is derived from the
painting should be simply ignored by Helen and it is exempted from the capital gains
tax.
Sale of historical sculpture:
A CGT event A1 under the “s104-10(1)”, comes into the play when the CGT
asset is sold. The sale of CGT asset must happen in order to apply the CGT event.
Referring to the definition of collectible given in “s108-10(2)”, it includes the assets
that used by an individual taxpayer for their own enjoyment and use ( Dabner 2016).
Some notable examples of collectables include the artworks, antiques, rare stamps,
coin etc. “S102-5, ITA Act 97” explains that the net capital gains are included for
assessment as taxable income of taxpayer.
A historical sculpture was sold by Helen for $6000. The sculpture was
eventually bought for $5,500. It can be stated that the sale sculpture is a collectable
under the definition “s108-10(2)”. A CGT event A1 under the “s104-10(1)”, comes
into the force when the historical sculpture was sold. The capital gains that is made
from the sculpture is included for assessment as taxable income of taxpayer based
on “s102-5, ITA Act 97”.
Sale of antique jewellery:
The sale of antique jewellery has led to loss for Helen because the original
price of the jewellery was $14,000 when it was bought in 1987 but was sold for
lesser value of $13,000. As a result, there is a capital loss for Helen. The special rule
for the collectable under “s118-10(1)” the capital loss should be separated and only
permitted to offset against capital gains. Helen is advised to follow the quarantining
rule of “s108-10(2)” and offset the capital loss from antique jewellery with the gains
that is made from the historical sculpture. While the leftover loss must be carry
forward under “s108-10(4)” by Helen to next year.
Sale of picture:
A picture was purchased in 1987 by Helen’s mother. The price paid for the
picture was $470. The personal use asset is defined in “s108-20(2)” and includes
those assets that are used by taxpayer for their personal enjoyment ( Kenny 2014).
The assets are generally the furniture, vehicles, television, household goods etc. The
taxpayers are required to disregard capital gains when the asset has the cost of less
than $10k under “s118-10(3)”.