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:
Are the receipts derived from the business activities amounts to ordinary income
under the ordinary concepts of “section 6-5, ITAA 1997”?
Rule:
Usually majority of the income that comes in to the taxpayer is regarded as the
ordinary income. The court in “Scott v CT (1935)” held that income should not be viewed as
the term of art and requires the application of principles to treat the receipts in accordance
with the ordinary concepts and use of mankind. Gains originating from the business activities
should be classified as ordinary income under “section 6-5”.
As per “Carden v F C of T (1938) 63 CLR 108” the income of the taxpayer is judged
through cash basis process if the income is gained through the primary services or primary
work performed (Miller and Oats 2016). The receipts are characterised as ordinary income
when it has three broad general characteristics;
a. Receipts is money or convertible to money
b. Receipts is periodic and involves recurrence of receipts
c. The receipts are related to revenue generating activities.
Voluntary payments are treated as income if there is appropriate connection with the
income producing activities of the taxpayer. The commissioner in “FCT v Dixon (1952)”
assessed the taxpayer for the supplementary that are received as income. The court held the
payment as ordinary income based on ordinary concepts (Kenny 2013). While in “FCT v
Harris (1980)” periodic but unpredictable unsolicited lump sums were received by the