Taxation Law: CGT Consequences of Selling Assets

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

1TAXATION LAW
Question Number 1:
Part 1:
The issue to be determined in this part is determining the capital gain consequence of
selling of the antique painting by Helen.
The antique painting can be regarded as a collectable and a capital gain asset as given
by section 180-10 (2) of the Income Tax Assessment Act 1997. As provided under sec. 102.2
CGT will be only applied if a CGT event has occurred as per the table given under section
104-5. The disposal or sale of a CGT asset is a CGT A1 event as per section 104-10(1). The
tax payerwill be an owner at the time when such asset is acquired under section 109-5 (1).
However, from the facts of the case, it is not clear when Helen received the painting
as it was bought by her father. If it was received before 20th of September of 1985, it will be
not included in CGT because it is then a pre CGT asset. However when it is received after the
said date, the painting will be considered as a collectable under the said Act. The cost base as
per section 110-25 (2), Element 1 with be the price of acquisition of 4000 $. But as she has
probably received the painting from her father by way of gift or as an heir, the Cost Base will
get modified accordingly with the market price of the painting when it was acquired
according to section 112-20. As per section 116.20, the capital proceeds is the selling price of
the painting which is 12000 $ as per section 116.20. The Capital gain will be equal to the
Capital Proceeds after deduction by Cost Base. If he can hold the asset for more than 1 year,
then she will be liable to get a benefit of 50 % as discount on it under Division 115.
Part 2:
The issue to be determined here is the CGT consequences of the sale of the historical
sculpture by Helen.

2TAXATION LAW
The historic sculpture as sold by Helen can be construed as a collectible and also a
capital gain as held in section 108-10 (2) of the Income Tax Assessment Act 1997. As held in
the section 102.2 of the said Act, CGT can only be applied when there will be a CGT event as
per the table given in section 104-5. Under the provisions of section 104- 10 (1), when a CGT
asset is sold or disposed off, a CGT event A1 will occur too. The time of acquisition of the
asset is December 1993 as per the facts of the case when she purchased the sculpture. It
shows that this sculpture is an asset of post CGT. Its disposal is also a CGT event A1 as per
section 104- 10(1). The cost base as per section 110- 25(2), Element one is the selling price
of 6000 $. The capital proceeds is the sale price of 5500 $ according to section 116.20. The
Capital Gain is the capital proceeds deducted by the cost base which produce a positive
amount meaning a total capital gain of 6000- 5500 =500 $. Thus capital gain is 500 $. It
means she will be eligible for 50 % discount under Division 115.
Part 3:
The issue involved here is to analyse the CGT consequences of the sale of the piece of
jewellery.
As per section 108-10(2) of the Income Tax Assessment Act 1997, the antiques
jewellery piece sold by her is a collectable asset as well as a capital gain. As held in the
section 102.2 of the said Act, CGT can only be applied when there will be a CGT event as
per the table given in section 104-5. Under the provisions of section 104- 10 (1), when a CGT
asset is sold or disposed off, a CGT event A1 will occur too. The tax payerbecomes the
owner when the asset is acquired by the party according to section 109- 5(1). Here, Helen
bought the jewellery in October 1987 for 14000 $. This shows that the jewellery piece is a
asset of post CGT and its sale is a CGT A1 event as per section 104- 10(1). The 1st element of
cost base is the purchase price of 14000 $ under section 110- 25(2). The capital proceeds is
the selling price of 13000 $ under section 116.20. The capital loss here is Capital proceeds