HI6028 Taxation Theory, Practice & Law: Individual Assignment

This assignment addresses three key taxation issues. The first question analyzes capital gains tax (CGT) implications for Helen, evaluating the tax treatment of various assets, including an antique painting, sculpture, jewelry, and a picture, considering purchase and sale dates and relevant thresholds. The second question focuses on Barbara's income, determining whether income from writing a book and selling its copyright constitutes income from personal exertion. The analysis considers the nature of the contract with Eco Books Limited and the timing of the book's creation. The third question examines the impact of an arrangement on Patrick's assessable income, requiring an assessment of whether a receipt constitutes income based on the principles established in relevant case law. Each section follows the issue-rule-application-conclusion format, referencing specific sections of the IT Assessment Act and supporting case law to provide a comprehensive analysis of each taxation scenario.

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

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Table of Contents
Answer to Question 1......................................................................................................................2
The Issue......................................................................................................................................2
The Rule.......................................................................................................................................2
The Application...........................................................................................................................3
The Conclusion............................................................................................................................4
Answer to Question 2......................................................................................................................6
The Issue......................................................................................................................................6
The Rule.......................................................................................................................................6
The Application...........................................................................................................................7
The Conclusion............................................................................................................................7
Answer to Question 3......................................................................................................................9
The Issue......................................................................................................................................9
The Rule.......................................................................................................................................9
The Application...........................................................................................................................9
The Conclusion..........................................................................................................................10
Reference.......................................................................................................................................11

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Answer to Question 1
The Issue
The primary issue which largely exists in the current scenario relates to that of the CGT
results which arise out of the given transactions which have been undertaken by Helen in lieu of
finding funds for her venture posing a fashion designer:
 An antique painting which Helen`s father had bought in the February of 1985 for $4000.
Helen had made sales of the painting later on 1st December 2018, for a sum of $12000.
 Helen also engaged in the sales of the sculpture which was historical in January, 2018
under a sum of $6000. The painting had been purchased in 1993, December for a sum of
$5500.
 Additionally, she had purchased the antique jewellery back in the October of 1987 for a
sum of $14000. She later sold it for $13000 in March of 2018.
 She made sales of the picture for $5000 in July of 2018 which had been purchased by her
mother back in 1987, March for a sum of $470.
The Rule
According to the S.102.20 of the IT Assessment of 1997, any profit or loss which has
been incurred by the support of the Capital Gain Taxation events, a position of a Capital Gain tax
gain or a loss. The S. 104.10 of the same act renders that if any sales of the CGT assets takes
place then those assets are required to be deemed as a Capital Gain Taxation event as per the A1
category. It has to be noted that this Capital Gain tax lies applicable only for those Capital gain
assets which have been acquired post 20th of September of 1985. Any other asset which has been

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purchased before the prescribed date shall not be taken under the CGT and hence, can be
considered to be under exemption with respect to the above case.
In the S. 108.10(2) of the Act, the term collectible is present. The section goes on to
describe the term as a particular item which generally is owned by the person who pays the taxes
for the personal use or otherwise. This section defines the collectible as the jewellery, folio or
antique objections. The S. 118.10(1) of the particular act tends to mention that a particular
collectible is considered as the capital asset in case it has been undertaken for an amount more
than the sum of $500 and any other collectible will be provided a treatment as an exemption
from this, if the amount is below the prescribed amount.
The S.108.10 describes that the CGT loss which is generally incurred by an individual by
the name of a sales being made of the collectible needs is required to be provided a treatment as
offset in regard to the Corporate Gains Tax gain which are generally incurred by an individual by
any sales made of a collectible item. Hence, in regard to this the loss may not be treated as a
particular offset to any other Capital Gain taxation gain which occurs.
As per the section of 108.20, the tax aspects of the Goods tax assets can be used for the
personal purpose. As per the particular section any such asset which is made used for the purpose
of the business is deemed to be exempted from the taxation if the particular value does not cross
the threshold of more than $10000.
The Application
The first transaction relating to the antique painting which had been bought in the year
1985 for an amount of $4000 had been sold on December 2018 for an amount of $12000.
Hence, this can be considered to be exempted from the Corporate Gain taxation gain as because

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of the rule the CGT assets which had been purchased post the month of September can be
considered to be crucial and the paining was purchased in February of the same year.
In the 2nd transaction, when Helen engaged in the sales of the sculpture in the month of
January of 2018, for a sum of $6000 the gain will be undergone a tax as per the S.118.10 (1)
because, the same had been purchased on December 1993 for 5500$ which as per the rule is
exceeding $500 and hence, only an amount which is less than $500 will be exempted under the
S.110.10.
In the 3rd transaction, it has to be noted that when a jewellery piece was purchased on
1897 for 14000$, Helen engaged in the sales of the same on the 20th of March of 2018, for a
period of 13000$. Hence, this can be largely considered to be an offset under the CGT gain
which has been incurred by an individual with respect to the sale of any other collectable. It
needs to be noted that the particular loss cannot be deemed as a CHT gain and will be an offset
against the Capital gain from the sale of a particular sculpture.
In line of this, when considering the 4th transaction which existed when Helen sold the
picture in July of 2018 for $5000, the same had been purchased by her mother in $470in the
March of 1987. This has to be treated as the Capital gain tax assets ought to be treated for
personal purposes under the S.108.20 of the particular act. Under the Capital Gain Tax as the
assets are used for personal reasons, they are considered from the taxation under the CGT in case
the value does not exceed a value of $10000. The item will be exempted from the taxation aspect
because it costs less than $10000.
The Conclusion
Therefore, it can be largely understood that:

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 The antique which was sold by Helen and purchased by the father for $4000 will be
exempted from the Capital Gain tax gain.
 When Helen made sales of her historical sculpture in the year January 2018 which was
purchased in December 1993, it was considered as a capital asset under S.118.10 (1).
 The jewellery which was purchased in 1986 for $14000 and sold for March 2018 for
$13000, the given will be deemed as offset in line with the Capital Gain tax gain which is
generally incurred by a person in line of the sales of the next collectible itself.
 The picture which was sold by Helen in July on $5000 was purchased by her mother for
$470 may be treated as the Capital Gains Tax assets as they were used for the personal
purpose under the particular S.108.20 of the Act because the picture costs considerably
less than the amount of $10000 and hence, has to be exempted from the taxation under
the CGT.

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Answer to Question 2
The Issue
The issue which largely concerns the particular case relates to the dilemma whether the
income from transaction as earned by Barbara can be taken to be as income from a personal
exertion. It needs to be noted that another issue lies with respect to the fact whether there would
have been any difference if the particular book had been written by Barbara before she has
signed a particular contract with the Eco Books Limited in her spare time.
The Rule
The section 6 of the IT Assessment act of 1036 states that it can bring about a change in
the definition of the income which has been gained from the personal exertion or instead derived
from it. This may comprise of any income which has been essentially earned by the tax payer
related to any effort which has been taken by him towards the income generation procedure. The
salaries, wages, business fees, earnings commissions and the super annulation along with the
pensions can be considered under this income. It needs to be mentioned that any income which
the person receives under this capability of being an employee in regard to the services which
were provided by him. Any income which comes from a business which the tax payer has been
paying will be covered under this income. Hence, with respect to the availing of bringing the
income under this purview can be considered to be a proximate relationship between the personal
exertion of the tax payer and the income which is earned. A good example of the case can be
considered to be the case of Commissioner of Taxation v. Blank [2015] FCAFC 154.
As per the section 6.5 of the IT Assessment of the year 1997, an income which has been
earned by an individual for the effort or any such related services provided by the person to earn

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an income will be considered as ordinary income. It also has to be understood that the Copyright
in general is mostly treated as the Capital Gains Tax asset for the overall purpose of the taxation.
The later proceeds from the sales of the same shall be treated as the Capital Gain tax gains.
Hence, it can be understood that, if the same procedure has been adopted for the purpose of
earning a profit, it cannot be taken as an ordinary income. In line of this, it can be understood
that a case of Whitford’s Beach Pty. Ltd v. Federal Commissioner of Taxation (1982) 150 CLR
355.
The Application
Therefore, it can be largely understood that, in the current scenario as the Eco Books
Limited tends to offer Barbara with an amount of $13000 for writing the particular book on the
economic principles but she never wrote a book about it and accepts to write the book related to
the same. Hence, this shall be treated to be an income with respect to the personal exertion under
the S.6 of the IT Assessment Act of 1936. She has undergone the copyright of the book for an
amount of $13400 with the firm and shall be then treated as a Capital gains tax asset with respect
to the same. It will be treated as a Capital Gain tax gains. As she undertook the sales of the books
manuscript to the same company`s library for an amount of $4350 plus several manuscripts for
the interview, this shall also be treated to be an income which has been derived from the personal
exertion
In such a scenario it has to be noted that, the boo would have been treated under the
Section six of the act only if Barbara had written it in her free time and sold it later on.

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The Conclusion
Therefore, it can be rightfully concluded that in both the scenarios, the income would
have been considered as an income from the personal exertion.

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Answer to Question 3
The Issue
The issue governing the case is the arrangement impact on the assessable income of
Patrick.
The Rule
As per the rule an individual who has been treating a receipt can be believed to be an
income which will be under subject to a proof that a gain was made out of the income. The case
is relevant in the case of Mayes vs. Hochstrasser of 190 AC 376.
It has to be noted that the income needs to be treated in a similar manner by regarding all
rules. The Scott v Commissioner of Taxation (NSW) 1935 35 SR NSW 215 supports his and
hence, the income shall be analysed in true compliance with the circumstances. Moreover, to
treat the receipt as an income the tax payer will have to establish the fact that it is a gain. As per
the section 6.5 of the Income Tax Assessment in the year of 1997, an income shall be solely
regarded as an ordinary income if derived through the normal concepts.
The Application
In the current scenario, it can be understood that Patrick made a payment of $52000 to his
son as he provided assistance in the new business and the son had agreed that he would pay back
him with $58000 at the end of 5 years. This cannot be an income as it has not been a gain. The
case of Hochstrasser v Mayes [1960] AC 376 supported this, required a receipt to be a proof of
the gain in regard of an assessable income.
Additionally as Patrick provided the loan to his son without a formal agreement of
deposit for the sum lent, his son was not required to pay an interest and this further made it very

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evident that the sum of repayment of the particular loan will not be taken as taxable income for
Patrick.
However, his son made the repayment of the full amount after 2 years through the
medium of a cheque which also comprised an equal amount of 5% on the taken amount. This
was treated to be under the income slab and under the gain as well. Although the gain was not
intended, it has to be treated as a gain. The case of the Federal Commissioner of Taxation vs
Bective [1932] HCA 22, shall be treated to be an income, under the S. 6.5 of the IT assessment
act.
The Conclusion
Therefore, the income of Patrick will be an income under S.6.5 of the particular act.

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Reference
Bective v Federal Commissioner of Taxation [1932] HCA 22
Blank v. Commissioner of Taxation [2015] FCAFC 154
Federal Commissioner of Taxation v. Whitfords Beach Pty. Ltd (1982) 150 CLR 355
Hochstrasser v Mayes 1960 AC 376
Scott v Commissioner of Taxation (NSW) 1935 35 SR NSW 215
The Income Tax Assessment Act 1936
The Income Tax Assessment Act 1997