Taxation Law

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Running head: TAXATION LAW
Taxation Law
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Question number 1
Answer number 1
Here the raised question is result on the selling by Helen of an painting of antique nature
by Helen relating to taxation of the capital gain of the Income Tax Assessment Act 1997.
As per sec.108.10 of said Act, antique painting is considered as an item of collectible
nature and is to be assessed as CGT asset. As per S.102.2 of ITA Act 1997, CGT gain & loss at
all times accompanies CGT event as scheduled in sec.104.5 of ITA Act 1997. If a CGT gain or a
loss fails to accompany CGT event scheduled in sec.104.5 of said Act, it ceases to comes under
the definition of an item of collectible nature and is not to be assessed as CGT asset. According
to S.104.10 of ITA Act 1997, the CGT event of A1 occurs when CGT asset is disposed off. As
per ITAA 1997, S.109.5, when a taxpayer acquires CGT asset, he becomes the owner of it.
In this given scenario, the painting’s time of acquisitioning is not provided. It is a fact
that father of Helen was the acquirer of the panting. In order to be assessed as CGT asset the
painting needs to be acquired on 20.09.1985 or after the said date. When the painting fails to
comply with the date required then it would not be considered as an item of collectible nature.
The CGT loss or gain is generally calculated by the deduction of lowering cost base cost
proceeded form other one. In this condition, the base cost is to be the acquisitioned price
amounting to $4,000. As Helen’s father was the owner of the painting, the transfer of ownership
would happen only after the death of her father or by way of gift. As per S.112.20 of ITA Act
1997, the base cost relating to market value existing at the time of acquisitioning is to be altered.
The price obtained by the sale amounting to $12,000 is to be implied by the capital in

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proceeding. As per division 115, when the asset involved is sold by taxpayer for one year of
period exceeding, a discount of 50% is to be allowed in the event.
Answer number 2
Here the raised question is result on the selling by Helen of a historical sculpture by
Helen relating to taxation of the capital gain of the Income Tax Assessment Act 1997.
As per sec.108.10 of said Act, historical sculpture is considered as an item of collectible
nature and is to be assessed as CGT asset. As per S.102.2 of ITA Act 1997, CGT gain & loss at
all times accompanies CGT event as scheduled in sec.104.5 of ITA Act 1997. If a CGT gain or a
loss fails to accompany CGT event scheduled in sec.104.5 of said Act, it ceases to comes under
the definition of an item of collectible nature and is not to be assessed as CGT asset. According
to S.104.10 of ITA Act 1997, the CGT event of A1 occurs when CGT asset is disposed off. As
per ITAA 1997, S.109.5, when a taxpayer acquires CGT asset, he becomes the owner of it.
Helen made the sculpture acquisition on 1993, December. In order to be assessed as CGT
asset the painting needs to be acquired on 20.09.1985 or after the said date. When the painting
fails to comply with the date required then it would not be considered as an item of collectible
nature. The CGT loss or gain is generally calculated by the deduction of lowering cost base cost
proceeded form other one. In this condition, the base cost is to be the acquisitioned price
amounting to $5,500. The price obtained by the sale amounting to $12,000 is to be implied by
the capital in proceeding. CGT gain of $500 is incurred in the transaction. As per division 115,
when the asset involved is sold by taxpayer for one year of period exceeding, a discount of 50%
is to be allowed in the event.
Answer number 3

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Here the raised question is result on the selling by Helen of antique jewellery by Helen
relating to taxation of the capital gain of the Income Tax Assessment Act 1997.
As per sec.108.10 of said Act, antique jewellery is considered as an item of collectible
nature and is to be assessed as CGT asset. As per S.102.2 of ITA Act 1997, CGT gain & loss at
all times accompanies CGT event as scheduled in sec.104.5 of ITA Act 1997. If a CGT gain or a
loss fails to accompany CGT event scheduled in sec.104.5 of said Act, it ceases to comes under
the definition of an item of collectible nature and is not to be assessed as CGT asset. According
to S.104.10 of ITA Act 1997, the CGT event of A1 occurs when CGT asset is disposed off. As
per ITAA 1997, S.109.5, when a taxpayer acquires CGT asset, he becomes the owner of it.
Helen made the jewellery acquisition on 1993, October. In order to be assessed as CGT
asset the painting needs to be acquired on 20.09.1985 or after the said date. When the painting
fails to comply with the date required then it would not be considered as an item of collectible
nature. The CGT loss or gain is generally calculated by the deduction of lowering cost base cost
proceeded form other one. In this condition, the base cost is to be the acquisitioned price
amounting to $14000. The price obtained by the sale amounting to $13,000 is to be implied by
the capital in proceeding. CGT loss of $1000 is incurred in the transaction. The loss would be
allowed against an offset of CGT loss only from collectible. When the gain of collectible is not
available the loss needs to be carried forward.
Answer number 4
Here the raised question is result on the selling by Helen of a picture by Helen relating to
taxation of the capital gain of the Income Tax Assessment Act 1997.

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As per sec.108.10 of said Act, picture is considered as an item of collectible nature and is
to be assessed as CGT asset. As per S.102.2 of ITA Act 1997, CGT gain & loss at all times
accompanies CGT event as scheduled in sec.104.5 of ITA Act 1997. If a CGT gain or a loss fails
to accompany CGT event scheduled in sec.104.5 of said Act, it ceases to comes under the
definition of an item of collectible nature and is not to be assessed as CGT asset. According to
S.104.10 of ITA Act 1997, the CGT event of A1 occurs when CGT asset is disposed off. As per
ITAA 1997, S.109.5, when a taxpayer acquires CGT asset, he becomes the owner of it.
In this given scenario, the picture’s time of acquisitioning is not provided. It is a fact that
father of Helen was the acquirer of the picture. In order to be assessed as CGT asset the picture
needs to be acquired on 20.09.1985 or after the said date. If the picture fails to comply with the
date required then it would not be considered as an item of collectible nature. The CGT loss or
gain is generally calculated by the deduction of lowering cost base cost proceeded form other
one. In this condition, the base cost is to be the acquisitioned price amounting to $470. As
Helen’s father was the owner of the picture, the transfer of ownership would happen only after
the death of her father or by way of gift. As per S.112.20 of ITA Act 1997, the base cost relating
to market value existing at the time of acquisitioning is to be altered. The price obtained by the
sale amounting to $5,000 is to be implied by the capital in proceeding. As per division 115, when
the asset involved is sold by taxpayer for one year of period exceeding, a discount of 50% is to
be allowed in the event.
Question 2
Issue 1

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Whether the receipt that Barbara has been accrued with for writing the book when offered by
Eco Books Ltd would be regarded as income from personal exertion.
The Income Tax Assessment Act 1936 definition of income from personal exertion section 6.1.
Again the definition provided was narrow and not enough equipped to deal with receipts. This
requires the courts to base their decisions upon the definition given by different cases. One such
definition involves the categorisation of a receipt as an income when it has resulted from
personal exertion being extended in the income manufacturing process. This definition has been
given under the discussion present in the case of Jarrold v Boustead 1963 41 TC 701
. Any ordinary income that a person earns by virtue of extension of personally rendered effort
will be treated as an income from personal exertion.
In the instant situation an amount of $13,000 has been provided to Barbara by the Eco Books Ltd
for writing the book under the contract between them. This needs to be treated as an income from
personal exertion. This is because Barbara has given her efforts and labour to write the book
which has resulted in her earning and amount of $13,000. This can be treated as an income from
personal exertion and can further be supported with the case of FC of T v Whitfords Beach Pty
Ltd 82 ATC 4031.
Again copyright is included in the list of CGT assets and any event resulting from the
transactions involving copyright will incur capital gain. This needs to be supported with the case
of Scott v. Federal Commissioner of Taxation [1966] HCA 48. From this principle it is evident
that the amount of 13400 dollars received by Barbara for selling the copyright of a book to Eco
Books Ltd answer capital gain.

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It has been made evident with the case of Brent v Federal Commissioner of Taxation [1971]
HCA 48, income derived from the selling of manuscripts of books as well as interviews implies
income from personal exertion. Hence the amount of $3200 and 4350 dollars will be e treated as
an income from personal exertion when accrue to Barbara by selling the manuscripts of the
interviews as well as the book to the library.
Issue 2
Whether the same implications have followed if the book has been written by Barbara in her
spare time and was decided to be sold afterwards.
The Tax Ruling 97/11 renders all the income derived from hobby to be not assessed for tax
purposes. Hence any income tax payer receives in pursuance of a hobby will not be treated as a
taxable income.
In this situation, if the book has been written by Barbara in her spare time, it would not have
amounted to an assessable income as the same was in pursuance to a hobby.
Hence, Barbara would not have been imposed with taxation on the amount received from the
selling of the book if the same has been written by her in her spare time.
Question 3
The issue arising from the present instance is whether the amount of money received from David
by virtue of loan repayment will be assessable taxable income for Patrick.
A taxpayer should actually derive a benefit from a receipt to include it in the assessable income.
This can be illustrated with the case of Bective v Federal Commissioner of Taxation [1932] HCA
22.

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An income can be subject to taxation if the same possesses all the requisites of a valid income.
The mere assigning the name of income to a receipt do not render the receipt to be taxable as an
income. This can be supported with the case of Hobbs v Hussy(1942) TC 153. While assessing
an income to be included in the taxable income of a taxpayer, the income needs to abide by all
the essentials of a taxable income. The receiver needs to have the nature of an income that comes
under the purview of taxation for being rendered as a taxable income. This need to be supported
with the principles established in the case of Federal Wharf Co. Ltd. v. Deputy Federal
Commissioner of Taxation (1930) 44 CLR 24.
A receipt to be included in the tax liability of an individual need to attach some benefit in favour
of the taxable income of the taxpayer. This needs to be assessed on the principles of the case of
Hochstrasser v Mayes 1960 AC 376.
As per section 6.5 of the Income Tax Assessment act 1997, any income that has resulted under
ordinary concepts will be subjected to assessability under ordinary income.
In the instant situation Patrick has provided an amount of money totalling after $52,000 to his
son David for assisting his business. Any interest to be payable has not been agreed between
Patrick and David. However the loan has been agreed to be repaid at the elapse of 5 years. The
payment to be made while repaying the loan amounted to $58,000. An extra amount of $6,000
has been agreed to be paid by David towards Patrick. At the end of 5 years and additional 5% has
been paid by David along with the repayment of the loan. Being an extra $6,000 and 5% over the
loan amount can be construed as a gain that has been extended towards Patrick by David. This
has enhanced the value of the income of Patrick and hence will be admitted as a income towards
Patrick.

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Hence the amount of money received from David by virtue of loan repayment will be assessable
taxable income for Patrick.

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Reference
Bective v Federal Commissioner of Taxation [1932] HCA 22
Brent v Federal Commissioner of Taxation [1971] HCA 48
FC of T v Whitfords Beach Pty Ltd 82 ATC 4031
Federal Wharf Co. Ltd. v. Deputy Federal Commissioner of Taxation (1930) 44 CLR 24
Hobbs v Hussy(1942) TC 153
Hochstrasser v Mayes 1960 AC 376
Jarrold v Boustead 1963 41 TC 701
Scott v. Federal Commissioner of Taxation. [1966] HCA 48
Tax Ruling 97/11
The Income Tax Assessment Act 1936 (Cth)
The Income Tax Assessment Act 1997 (Cth)