Taxation

This document discusses the tax consequences arising from the sale of various assets by Helen. It explains the assessment of these assets as CGT assets and the computation of capital gain or loss. It also addresses the taxation of income earned from personal exertion and loan repayment. References to relevant cases and tax rulings are provided.

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

1TAXATION
Answer 1
A.
The capital game tax consequences arising from the deal relating to the selling of the antique
painting as made by Helen.
The deal involving the selling of the painting as provided in this case will need to be
subjected to assessment for taxation in the form of a collectible that can be rendered as a
CGT asset u/s 108-10 of the Income Tax Assessment Act 1997. The loss as well as the gain
of capital nature that accrues in a particular transaction u/s 102-10 of the Act needs to
supplemented by capital gain event u/s 104-5 of the Act. The various categories of capital
gain events as enumerated u/s 104-5 of the Act points towards the sale of an asset to be
categorised as an A1 category of capital gain event. The effective timing as to the acquisition
of a Capital asset will be assessed as to the conferring of ownership upon the taxpayer with
respect to the asset u/s 109-5 of the Act.
The facts of this case does not provide any express mention of the effective timing of
acquisition of the painting as made by Helen. This anomaly regarding the effective time is
required to be assessed backed with the fact that the painting has actually been purchased by
Helen’s father. The assessment of the painting as a Capital asset will only be allowed if the
acquisition of the painting by Helen has been affected after the date of 20-09-1985. The asset
of capital nature will not be included in the assessment of CGT liability even if it can be
made if evident that the purchase of the same has been affected prior to the prescribed date.
Being acquired a subsequent date the painting will be brought under the category of CGT
assets and will be treated as collectibles. The capital gain or loss arising from the sale will be
computed by deducting the lower of the cost precede and the cost base from the other one. In
the present situation the cost base is $4,000. As the acquisition of the painting was made by

2TAXATION
Helen by succession or by death the item being actually purchased by her father the cost of
acquisition needs to be subjected to the market value existing at that time. However the
capital proceed totalling up to 12000 dollars. Being held for more than 1 year a 50% discount
will be available.
B.
The capital game tax consequences arising from the deal relating to the selling of the
historical sculpture as made by Helen.
The deal involving the selling of the sculpture as provided in this case will need to be
subjected to assessment for taxation in the form of a collectible that can be rendered as a
CGT asset u/s 108-10 of the Income Tax Assessment Act 1997. The loss as well as the gain
of capital nature that accrues in a particular transaction u/s 102-10 of the Act needs to
supplemented by capital gain event u/s 104-5 of the Act. The various categories of capital
gain events as enumerated u/s 104-5 of the Act points towards the sale of an asset to be
categorised as an A1 category of capital gain event. The effective timing as to the acquisition
of a Capital asset will be assessed as to the conferring of ownership upon the taxpayer with
respect to the asset u/s 109-5 of the Act.
The sculpture has when purchased by Helen on the date of December 1993. The assessment
of the sculpture as a Capital asset will only be allowed if the acquisition of the sculpture by
Helen has been affected after the date of 20-09-1985. The asset of capital nature will not be
included in the assessment of CGT liability even if it can be made if evident that the purchase
of the same has been affected prior to the prescribed date. Being acquired a subsequent date
the sculpture will be brought under the category of CGT assets and will be treated as
collectibles. The capital gain or loss arising from the sale will be computed by deducting the
lower of the cost precede and the cost base from the other one. In the present situation the

3TAXATION
cost base is $5500. However the capital proceed totalling up to 6000 dollars. There has been a
capital gain of $500. Being held for more than 1 year a 50% discount will be available.
C.
The capital game tax consequences arising from the deal relating to the selling of the antique
jewellery as made by Helen.
The deal involving the selling of the antique jewellery as provided in this case will need to be
subjected to assessment for taxation in the form of a collectible that can be rendered as a
CGT asset u/s 108-10 of the Income Tax Assessment Act 1997. The loss as well as the gain
of capital nature that accrues in a particular transaction u/s 102-10 of the Act needs to
supplemented by capital gain event u/s 104-5 of the Act. The various categories of capital
gain events as enumerated u/s 104-5 of the Act points towards the sale of an asset to be
categorised as an A1 category of capital gain event. The effective timing as to the acquisition
of a Capital asset will be assessed as to the conferring of ownership upon the taxpayer with
respect to the asset u/s 109-5 of the Act.
The jewellery has when purchased by Helen on the date of October 1987. The assessment of
the jewellery as a Capital asset will only be allowed if the acquisition of the jewellery by
Helen has been affected after the date of 20-09-1985. The asset of capital nature will not be
included in the assessment of CGT liability even if it can be made if evident that the purchase
of the same has been affected prior to the prescribed date. Being acquired a subsequent date
the jewellery will be brought under the category of CGT assets and will be treated as
collectibles. The capital gain or loss arising from the sale will be computed by deducting the
lower of the cost proceed and the cost base from the other one. In the present situation the
cost base is $14000. However the capital proceed totalling up to 13000 dollars. There has

4TAXATION
been a capital gain of $1000. Being held for more than 1 year a 50% discount will be
available.
D.
The capital game tax consequences arising from the deal relating to the selling of the picture
as made by Helen.
The deal involving the selling of the picture as provided in this case will need to be subjected
to assessment for taxation in the form of a collectible that can be rendered as a CGT asset u/s
108-10 of the Income Tax Assessment Act 1997. The loss as well as the gain of capital nature
that accrues in a particular transaction u/s 102-10 of the Act needs to supplemented by capital
gain event u/s 104-5 of the Act. The various categories of capital gain events as enumerated
u/s 104-5 of the Act points towards the sale of an asset to be categorised as an A1 category of
capital gain event. The effective timing as to the acquisition of a Capital asset will be
assessed as to the conferring of ownership upon the taxpayer with respect to the asset u/s 109-
5 of the Act.
The facts of this case does not provide any express mention of the effective timing of
acquisition of the picture as made by Helen. This anomaly regarding the effective time is
required to be assessed backed with the fact that the picture has actually been purchased by
Helen’s mother. The assessment of the picture as a Capital asset will only be allowed if the
acquisition of the picture by Helen has been affected after the date of 20-09-1985. The asset
of capital nature will not be included in the assessment of CGT liability even if it can be
made if evident that the purchase of the same has been affected prior to the prescribed date.
Being acquired a subsequent date the picture will be brought under the category of CGT
assets and will be treated as collectibles. The capital gain or loss arising from the sale will be
computed by deducting the lower of the cost precede and the cost base from the other one. In

5TAXATION
the present situation the cost base is $470. As the acquisition of the painting was made by
Helen by succession or by death the item being actually purchased by her mother the cost of
acquisition needs to be subjected to the market value existing at that time. However the
capital proceed totalling up to 5000 dollars. Being held for more than 1 year a 50% discount
will be available.
Answer 2
The issue that arises from the facts of the case is the accessibility of the income earned by
Barbara from writing the book offered by Eco Books Ltd under the head of income from
personal exertion. Whether the same implications has been evident if Barbara has written the
book in her spare time and decided to sell it subsequently.
An income that arrives to the taxpayer by virtue of the efforts he has extended while
attempting to earning taxable income will be computed as income from personal exertion.
This can be illustrated with the case of Hochstrasser v Mayes (1960) AC 376. Such an
income is to be subjected to taxation as has been defined u/s 6-1 of the Income Tax
Assessment Act 1936.
It has been discussed in the case of Jarrold v Boustead 1963 41 TC 701, when a taxpayer
gives effort to earn income the same is required to be taxed as income from personal exertion.
Hence the amount of 13000 dollars is required to be treated as an income from personal
exertion as Barbara has given her efforts to write the book when offered by Eco Books Ltd.
As per the principles laid down in the case of Brent v Federal Commissioner of Taxation
[1971] HCA 48, copyright is required to be subject to capital gain tax. Hence the amount of
13400 dollars received by Barbara for the sale of the copyright of a book will be treated as a
CGT gain.

6TAXATION
The amount received for the sale of the manuscripts of the book as well as the interview
amounting to 4350 dollars and $3200 will be e treated as an income from personal exertion.
The tax ruling 97/11 requires a taxpayer to be exempted from being imposed with taxation
upon the income that he has earned in the pursuance of his hobby.
Hence the income earned by Barbara for writing the book in his spare time and selling it
afterwards will not be subject to taxation.
Answer 3
Whether the income that Patrick has earned by way of the loan repayment will be included in
his taxable income.
As discussed in the case of Allied Mills Industries Pty Ltd v FCT (1989) 89 ATC 4365, a
receipt will only be taxable income if the same has added certain value in a beneficial manner
to is the taxable income of a person.
Any income that has been availed through ordinary concepts will be treated as an ordinary
income u/s 6-5 of the Act. As held in the case of Hobbs v Hussy (1942) TC 153, an income
will only be treated as a taxable income if the same has been availed through ordinary means
as well as added some benefit to the taxpayer.
In the present instance the loan amount extended was $52,000. However the agreement
between Patrick and David shows a repayment to be made with an amount of $58,000. An
additional amount of $6,000 was visible from the arrangement. However no interest has been
agreed to be made payable by David while repaying the loan. Again at the end of 5 years
when the loan was due David has made a payment of an additional 5% on top of the loan
amount. These extra amounts when paid to Patrick will escalate his income which is taxable.

7TAXATION
This implies a gain to have been accrued to Patrick by such arrangement. Hence it will be
included in the assessable income of Patrick.
Hence the income that Patrick has earned by way of the loan repayment will be included in
his taxable income.

8TAXATION
Reference
Allied Mills Industries Pty Ltd v FCT (1989) 89 ATC 4365
Brent v Federal Commissioner of Taxation [1971] HCA 48
Hobbs v Hussy(1942) TC 153
Hochstrasser v Mayes (1960) AC 376
Jarrold v Boustead 1963 41 TC 701
Tax Ruling 97/11
The Income Tax Assessment Act 1936 (Cth)
The Income Tax Assessment Act 1997 (Cth)