Taxation Law

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Author Note

1TAXATION LAW
Question 1
Issue
The issues in this present situation are the Capital Gain Tax consequences of the following
transactions effected by Helen for the purpose of funding her business as a fashion designer:
 An antique impressionism painting Helen’s father bought in February 1985 for
$4,000. Helen sold the painting on 1 December 2018 for $12,000.
 Helen sold her historical sculpture on 1 January 2018 for $6,000. She has
purchased the piece on December 1993 for $5,500.
 An antique jewellery piece purchased in October 1987 for $14,000. Helen sold the
antique jewellery piece on 20 March 2018 for $13,000.
 Helen sold a picture for $5,000 on 1 July 2018. Her mother purchased the picture
in March 1987 for $470.
Rule
Section 102.20 pertaining to the Income Tax Assessment Act 1997 confers upon any loss
or profit that has been accrued by virtue of the occurrence of CGT events, the status of a CGT
gain or loss. Section 104.10 of the Act renders any sale of CGT assets to be treated as a CGT
event under the category A1. The applicability of the CGT can be effected with respect to
only those CGT assets has been acquired after the date of 20/09/1985. Any asset that was
acquired prior to the mentioned date will not be treated under CGT and will be considered
and exemption to the same.
The word collectible has been provided in the Act under section 108.10(2). This section
define the word collectible as an item which is owned by the individual paying taxes for
personal usage as well as enjoyment. Under this section, collectible can be anything such as a
jewellery, a rare folio or even certain antique objects. As per section 118. 10 (1) of the Act

2TAXATION LAW
collectible will only be taxed as a capital asset if the same has been acquired for more than
$500. Any collectible under the prescribed amount will be treated as an exempt under the Act
by virtue of section 110.10.
Under section 108.10 of the Act, any CGT loss that has been incurred by a person by
virtue of a sale of a collectible needs to be treated as an offset with respect to any CGT gain
has been accrued to person with respect to any sale of another collectible only. This loss
cannot be treated as an offset to any other CGT gain.
Under section 108.20 of the Act mentions the taxability of CGT assets, which are used for
personal purposes. Under this section any CGT asset that is used for personal purposes will
be treated as an exempt from taxation under CGT if the value of the same does not exceed
$10,000.
Application
In the first transaction, an antique impressionism painting Helen’s father bought in
February 1985 for $4,000 has been sold by her on 1 December 2018 for $12,000. This will be
treated as an exempt from the CGT gain as application of the CGT can be effected with
respect to only those CGT assets that has been acquired after the date of 20/09/1985. Any
asset that was acquired prior to the mentioned date will not be treated under CGT and will be
considered as an exemption to the same.
In the second transaction, Helen sold her historical sculpture on 1 January 2018 for
$6,000. She has purchased the piece on December 1993 for $5,500. This will be taxed as a
capital asset as per section 118. 10 (1) of the Act as the same has been acquired for more than
$500. Any collectible under the prescribed amount will be treated as an exempt under the Act
by virtue of section 110.10.