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
Issues:.........................................................................................................................................2
Rule:...........................................................................................................................................2
Application:................................................................................................................................3
Conclusion:................................................................................................................................4
References..................................................................................................................................5

2TAXATION LAW
Answer to question 1:
Issues:
The key legal issue involved in the case is to determine whether the business receipts
received from rendering services amounts to ordinary income under the “section 6-5, ITAA
1997”?
Rule:
As per the “section 6-5, ITAA 1997”, most of the income that are received by the
taxpayer are treated as the ordinary income under the meaning of ordinary concepts. In
“Scott v CT (1935)” the court held that income should not be treated as the word of art and
requires the application of appropriate principles to treat the receipts in accordance with the
ordinary concepts. There are three ways of characterising the income;
a. Income must be in money or should be easily converted into money
b. It should be periodically derived with recurrence and regularly
c. Receipts that are earned from revenue producing activity should be held as ordinary
income.
The receipts method is regarded as the cash method or cash basis. (Woellner et al.
2016). The cash method is usually applicable on professional practitioners such as lawyers,
doctors and other professional people. The income holds adequate connection with the
income production activities of the taxpayer. As held in the case of “Carden v F C of T
(1938) 63 CLR 108” where the income that results from the primary services rendered or
work performed by the taxpayer personally then it is assessed based on the cash basis
(Barkoczy 2016).