Taxation Law

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Calculation of Net Income from Partnership:............................................................................4
Working Papers:.........................................................................................................................5
Answer to question 2:.................................................................................................................7
References:...............................................................................................................................10

2TAXATION LAW
Answer to question 1:
Issues:
The case study brings forward the issues relating to the determination of the net
partnership income based on the expenses and receipts reported in the income year.
Rule:
As per the discussion in “division 5 of the ITAA 1936” partnership is not recognized
as an unique legal aspect falling under the general law and also it is not included in paying
tax. In a partnership business the partners decide their tax payables according to the profits
earned as well as distributed. As per the “section 91” partnership is an important aspect while
lodging the income tax for showing the profit shared between the shareholders (McKee,
Nelson and Whitmire 2017). “Section 92 of the ITAA 1997” highlights all the profits are
distributed among the shareholders and they are responsible for paying tax on that gained
profits. As per the “section 995-1(1)” partnership can be understood in a better way if the
objectives of gaining profit are carried forward throughout business lifecycle (Graetz et al.
2015). In this section one thing is made clear that partnership is nothing but the objective of
gaining ordinary income or statutory bonus while doing sharing the business idea with some
shareholder.
As per the explanation given in “section 6-5 of ITAA 1997” the taxpayers pay
majority of their income as the ordinary income (Oishi, Kushlev and Schimmack 2018).
According to “Commissioner of Taxation v Scott (1935)” the income is not considered as an
artistic term and the application of important principles are used to make the objective of
ordinary concepts successful for the mankind.

3TAXATION LAW
According to “section 8-1 of the ITAA 1997” there are two important extremities.
Taxpayer can include their claims for deductions from their taxable incomes if the income or
loss is occurred when they are about to fulfil the business objectives for gaining taxable
profits (Bankman et al. 2018). Conversely, according to “section 8-1 (2) of the ITAA 1997”
the taxpayer is not allowed to claim expense those are domestic, private or capital in nature.
Hence, partnership policies don’t allow any deductions.
According to the Australian Taxation Office the taxpayer with an instant write-off can
claim the deductions those are less than 20,000. Agreeing to the “taxation ruling of TR
97/23”, repair are also allowed to the taxpayer under “section 25-10 of the ITAA 1997”
(Schenk 2017). The taxpayers can get a deducted amount if the repairs are done for the
damage or corrosion of the property. Conditions to be applicable in these kind of repair is, if
the repairs are including a expense amount as capital then the deductions are not allowed to
the taxpayer. According to “Western Suburbs Cinemas v FC of T (1952)” the court does not
allow the taxpayer to get the deductions for notional deductions (Murphy and Higgins 2016).
Applications:
The considered case study is all about the partnership of Olivia and Daniel who are
continuing a collaborative business. During the income year the partnership has reported
receipts and the expenses are incurred during throughout the business functionalities. The
business gained from profit from the business sales encountered and payments from the
debtors (Schmalbeck, Zelenak and Lawsky 2015).
According to the event “sect 6-5 of the ITAA 1997” ordinary income is gained by
Olivia and Daniel through the partnership business sales and debtors payments. According to
the concepts declared the ordinary income gained from business sales and debtor’s payment