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Taxation Law

   

Added on  2023-01-18

8 Pages1553 Words85 Views
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Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
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Taxation Law_1

1TAXATION LAW
Table of Contents
Introduction:...............................................................................................................................2
Tax Implications relating to sale of house:................................................................................2
Tax consequences of legal fees:.................................................................................................3
Computation of taxable income:................................................................................................4
Conclusion:................................................................................................................................5
References:.................................................................................................................................7
Taxation Law_2

2TAXATION LAW
Introduction:
The present report is based on determining the tax consequences of Chris Matthews
for the year ended 2017/18. The report would take into the account the income and expenses
occurred by the taxpayer from the employment and private consulting business. Additional
considerations would be paid towards capital gains made from the sale of house and legal
fees incurred by the taxpayer in defending the legal charges.
Tax Implications relating to sale of house:
As stated by the ATO the main residence of the taxpayer is usually not included for
capital gains tax purpose. nevertheless, a taxpayer does not get the full exemption relating to
main residence if the taxpayer uses any portion of the house to generate income particularly
renting the room and running the business (Barkoczy 2014). In order to calculate the net
amount of capital gains a taxpayer is usually required to determine the market value of the
house such as the time the time the taxpayer used to generate income.
The property was bought by Chris on 1st March 1999 and the property was used for
producing income on 3rd July 2014. On 19th June 2018 the property was eventually sold for a
sale price of $1,000,000. The house was the main residence for Chris all through the
ownership. For a specific time period Chris used a part of the house to carry his private
consultancy business. Chris modified the rooms in order to make it suitable for business use
and the remaining for private and domestic purpose. Therefore, it represented 5% of the total
floor area of the house. Chris made the capital gains of $572,000 when the house was sold.
Therefore, Chris would only be entitled to obtain a partial main residence exemption from
CGT because the property was used to produce business income. Additionally, Chris held the
property for a minimum of 12 months’ period therefore, he can use the 50% CGT discount
Taxation Law_3

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