Taxation Law: Capital Gains and Deductions

Running head: TAXATION LAW
Taxation Law
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TAXATION LAW1
Table of Contents
Answer to question 1:.................................................................................................................2
A: The capital gain on sale of the family home:....................................................................2
B: Capital gain or loss made from the car:.............................................................................3
C: The capital gain in relation to the sale of business:...........................................................3
D: The capital gain in relation to selling the furniture:..........................................................4
E: The capital gain in relation to selling the paintings:..........................................................5
Answer to question 2:.................................................................................................................7
Issues:.....................................................................................................................................7
Laws:......................................................................................................................................7
Application:............................................................................................................................8
Conclusion:............................................................................................................................9
References:...............................................................................................................................10

TAXATION LAW2
Answer to question 1:
A: The capital gain on sale of the family home:
Not all the assets that are purchased or acquired following 20th sept 1985 falls within
the purview of CGT rules. As per the “division 118 of the ITAA 1997” it lay down numerous
exemptions that covers the exempted assets, exempted transactions and anti-over lapping
provisions (Lam and Whitney 2016). In some of the cases the capital gains tax is not
applicable on the capital gains since there are other provisions of the taxation laws is applied
in its place.
Capital gains or loss that takes place to the dwelling which forms the main dwelling
or residence of the taxpayer is ignored if the following conditions are met;
a. The taxpayer is regarded as the individual
b. The dwelling was the main residence of the taxpayer all through the ownership
period; and
c. Under “section 118-10, ITAA 1997” the dwelling ownership failed to pass to the
beneficiary of the deceased estate (Sadiq 2016).
The case facts obtained suggest that a house was acquired by Jasmine during 1981 for
a sum of $40,000. The taxpayer later sold the house for a sum of $650,000 in the present tax
year. The house acquired by Jasmine should be termed as the Pre-CGT asset. This is because
the asset was purchased before the introduction of the CGT regime. Additionally, Jasmine
dwelt in that house right from the time when she first acquired it. With respect to “sec 118-
110 (1), ITAA 1997” the house of Jasmine meet the requirements for the main residence
exemption. The net amount of capital gains that is made by Jasmine following the sale of her
main residence is exempted from CGT.

TAXATION LAW3
B: Capital gain or loss made from the car:
In almost every case where something is sold results in “CGT event A1” under
“section 104-10, ITAA 1997”. The CGT asset should have been disposed to the entity and it
should not be lost or destroyed (Villios 2014). A CGT asset under “sec 108-20, ITAA 1997”
includes the personal use assets apart from the collectibles that is largely held in possession
of taxpayer for their private usage and enjoyment. Certain special rules are laid down for the
personal use assets. Under the “sec 108-20, ITAA 1997” the capital loss that is occurred upon
selling the personal use assets should always be disregarded.
The case facts obtained puts forward that a car was purchased in 2011 having
acquisition cost of $31,000 and it now worth approximately $10,000 when she sold it. The
car is classified under “section 108-20, ITAA 1997” as the personal use asset which Jasmine
kept for her private use. The sale of Car has given rise to “CGT event A1” under “section
104-10, ITAA 1997”. However, Jasmine must denote that upon disposal of car a capital loss
occurred. As the car has been classified as the personal use asset, the capital loss incurred
should be ignored by her under “sec 108-20, ITAA 1997”.
C: The capital gain in relation to the sale of business:
As per “Div-152” small business are given concession (Friend 2015). To claim CGT
concession certain conditions needs to be satisfied, which are as follows;
a. The business must be a small business entity and the aggregate turnover in the current
year or past year must not be greater than $2 million or the assets net value should not
be greater than $6 million (Sadiq and Marsden 2014).
b. The assets must be an active asset
Small business entity can avail four types of concessions, which are as follows;
a. 15-Year Exemption: The taxpayer should hold the asset for at least 15 years.