Taxation: Capital Gain Consequences and Income from Personal Exertion

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

TAXATION1
Q 1
1
The issue in this present situation is to assess the capital gain consequence of the transaction
involving the seal of antique painting by Helen.
The painting involved in this case depicts a collectible and it is required to be treated as a
CGT asset u/s 108.10 of the ITAA 97. A CGT event is said to have incurred under section
102.2 of the Act when it can be categorised under any of the events provided under section
104. In case a CGT event involves the sale of an asset it needs to be brought under the
purview of the A1 category of CGT event as under section 104. 10. The timing at which the
asset has been acquired is the time when the taxpayer assumes ownership as on the section
109.5.
It cannot be made clear from the facts provided that exactly at what point of time the painting
has been acquired by Helen. The painting was initially bought by her father. If the purchase
has been effected prior to the 20th September of the year 1985, it would not have been
included in the computation of CGT and would have treated as an exemption being and pre-
CGT asset. However if the asset has been purchased subsequent to the mentioned date it
would have been treated as a collectible. In case of this painting the cost was under section
110.25 will be the element one that will point towards the acquisition price amounting to
$4,000. In this case Helen might have obtain the painting either by way of gift or by of
succession. Under section 112.20, the cost base is required to be modified with respect to the
market value of the painting at the time of the acquisition. Again under section 116. 20, cost
proceed will be the sale price that is the amount of 12000 dollars. For arriving at the CGT
gain the cost base needs to be deducted from the capital proceeds. Again if the asset has been

TAXATION2
hold by Helen for a period of more than one year it will be allowed a discount of 50% as per
div 115.
2
The issue that can be arrived at from the given situation is the assessment of the CGT
consequences relating to the transaction involving the sale of historical sculpture by Helen.
In general sense, historical sculpture that has been sold is required to be treated as a
collectible and required to be construed as a CGT asset as per section 108. 10. A CGT event
is said to have incurred under section 102.2 of the Act when it can be categorised under any
of the events provided under section 104. In case a CGT event involves the sale of an asset it
needs to be brought under the purview of the A1 category of CGT event as under section 104.
10. The timing at which the asset has been acquired is the time when the taxpayer assumes
ownership as on the section 109.5. present situation the sculpture has been purchased by
Helen in the month of December in the year 1993. This implies the sculpture to be a post-
CGT asset and the sale of the same having the effect of disposing it off will be a CGT event
categories A1 as per section 104.10. In this case the cost base under section 110.25 will have
the first element that is the acquisition price of $6,000. The cost proceeds will be the price
earned from selling the asset that is $5,500 under section 116. 20. In this case, the CGT loss
will be computed by deducting the cost base by the cost proceeds. Such an operation will
evidence of CGT loss of $500. Being a CGT loss accruing from collectible, it needs to be
treated as an offset against a collectible only and not from other CGT assets. Hence the loss
will be carried forward to the subsequent year.
3
The issue in this present situation is to assess the capital gain consequence of the transaction
involving the sale of antique jewellery by Helen.