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
Computation of Partnership Net Income:..................................................................................3
Working Papers..........................................................................................................................4
Answer to question 2:.................................................................................................................5
References:.................................................................................................................................8

2TAXATION LAW
Answer to question 1:
The partnerships are not levied for taxation since it is not the separate legal entity. The
partners are held taxable based on their individual share for their partnership income under
“section 92 (1) of the ITAA 1936”. As stated in “section 995-1 of the ITAA 1997”
partnership represents an association of person that are carrying on the business of partners or
they receive ordinary income or statutory income in a joint manner (Braithwaite 2017). As
per the “section 90 of the ITAA 1936” the net income of the partnership is defined as the
partnership income after deducting the permissible deductions given the partnership were
residents.
As understood in the current situation of Daniel and Olivia they operated a mixed
business. The partnership reported certain receipts and expenses which would be eligible for
deductions. As defined in “Sect 6-5 of the ITAA 1997” ordinary income generally means that
income which is obtained by the taxpayer as the ordinary income. The judicial concept of
“sect 6-5” is defined in “Scott v CT (1935)” where ordinary income as receipts based on the
ordinary concepts and use of mankind (Woellner et al. 2014). The receipts from sales and
debtors cash payments constitutes ordinary income and it is included for assessment in case
of Daniel and Olivia Smith. The receipts are obtained during the ordinary course of business
and hence it is included in the determination of partnership income.
As per the “section 8-1 of the ITAA 1997” the two positive limbs allow the taxpayer
to obtain deduction for any losses or outgoings till the extent that it is occurred in gaining or
generating the assessable income or incurred necessarily while carrying on the business for
producing assessable income (Pinto 2014). The partnerships report the drawings for private
purposes. In partnership the drawings made by the partners are not allowed to claim as
deduction under “section 8-1 of the ITAA 1997”.