Taxation

This document provides solutions to various taxation issues including CGT events and income from personal exertion. It discusses the taxation implications of selling collectibles and income derived from writing a book. It also addresses the treatment of loan repayments as income.

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

1TAXATION
Answer 1
Issue 1
The matter of concern in this given case is the result of the sale of painting by Helen under
CGT.
The transaction relating to the antique painting needs to be treated as a transaction involving
collectible as under s. 108.10 of the ITA Act 97 and will be subjected to taxation as CGT
asset. CGT gain as well as CGT loss as provided under s. 102.2 of the ITA Act 97, is required
to be escorted by a CGT event as enumerated under s. 104.5 of the ITA Act 97. The list of
CGT events provided under s. 104.10 of the ITA Act 97 requires any CGT event that
involves the sale of a CGT asset with a view to dispose it off permanently to be treated as an
A1 category of CGT event. The time of acquisition of a CGT asset by the holder of the same
is the time when the ownership of the asset has been conferred upon that holder as can be
conceived from s. 109.5 of the ITA Act 97 (Barkoczy 2016).
The exact timing at which the ownership of the painting has been conferred upon Helen is not
what made clear with the facts of the case. The reason behind such an ambiguity is the fact
that the painting has been purchased by her father. Another factor that needs to be considered
is the timing at which the painting has been purchased. For being subjected to CGT the asset
needs to be purchased on a date after or on 20-09-1985 as any asset purchased in that
prescribed date will be treated as a CGT asset. The loss or gain arising out of such a CGT
event will be required to be computed by subtracting the lower of the cost proceed and cost
base from the other one. In this case the cost base will be $4000, which depicts the first
element of the cost base. Being purchased by her father the painting has came to the
possession of Helen either by succession or by gift. This will require the cost base to be
adjusted with the market value of the existing situation during the acquisition of the same.

2TAXATION
The capital proceed gathered amounted to $12,000. Being held for more than 1 year a 50%
discount will also be allowed under div 115.
Issue 2
The matter of concern in this given case is the result of the sale of historical sculpture by
Helen under CGT.
The transaction relating to the historical sculpture needs to be treated as a transaction
involving collectible as under s. 108.10 of the ITA Act 97 and will be subjected to taxation as
CGT asset. CGT gain as well as CGT loss as provided under s. 102.2 of the ITA Act 97, is
required to be escorted by a CGT event as enumerated under s. 104.5 of the ITA Act 97. The
list of CGT events provided under s. 104.10 of the ITA Act 97 requires any CGT event that
involves the sale of a CGT asset with a view to dispose it off permanently to be treated as an
A1 category of CGT event. The time of acquisition of a CGT asset by the holder of the same
is the time when the ownership of the asset has been conferred upon that holder as can be
conceived from s. 109.5 of the ITA Act 97 (Barkoczy 2016).
The sculpture has been purchased by Helen on the month of December in the year 1993. For
being subjected to CGT the asset needs to be purchased on a date after or on 20-09-1985 as
any asset purchased in that prescribed date will be treated as a CGT asset. The loss or gain
arising out of such a CGT event will be required to be computed by subtracting the lower of
the cost proceed and cost base from the other one. In this case the cost base will be $5500,
which depicts the first element of the cost base. The capital proceed gathered amounted to
$6000. There will be a CGT gain of $500. Being held for more than 1 year a 50% discount
will also be allowed under div 115.
Issue 3

3TAXATION
The matter of concern in this given case is the result of the sale of antique jewellery by Helen
under CGT.
The transaction relating to the antique jewellery needs to be treated as a transaction involving
collectible as under s. 108.10 of the ITA Act 97 and will be subjected to taxation as CGT
asset. CGT gain as well as CGT loss as provided under s. 102.2 of the ITA Act 97, is required
to be escorted by a CGT event as enumerated under s. 104.5 of the ITA Act 97. The list of
CGT events provided under s. 104.10 of the ITA Act 97 requires any CGT event that
involves the sale of a CGT asset with a view to dispose it off permanently to be treated as an
A1 category of CGT event. The time of acquisition of a CGT asset by the holder of the same
is the time when the ownership of the asset has been conferred upon that holder as can be
conceived from s. 109.5 of the ITA Act 97 (Barkoczy 2016).
The jewellery has been purchased by Helen on the month of October in the year 1987. For
being subjected to CGT the asset needs to be purchased on a date after or on 20-09-1985 as
any asset purchased in that prescribed date will be treated as a CGT asset. The loss or gain
arising out of such a CGT event will be required to be computed by subtracting the lower of
the cost proceed and cost base from the other one. In this case the cost base will be $14000,
which depicts the first element of the cost base. The capital proceed gathered amounted to
$13000. There will be a CGT loss of $1000. This needs to be considered as an offset against
CGT gain accruing from a collectible. In the absence of such a gain the loss will be carried
forward to the subsequent year.
Issue 4
The matter of concern in this given case is the result of the sale of picture by Helen under
CGT.

4TAXATION
The transaction relating to the picture needs to be treated as a transaction involving
collectible as under s. 108.10 of the ITA Act 97 and will be subjected to taxation as CGT
asset. CGT gain as well as CGT loss as provided under s. 102.2 of the ITA Act 97, is required
to be escorted by a CGT event as enumerated under s. 104.5 of the ITA Act 97. The list of
CGT events provided under s. 104.10 of the ITA Act 97 requires any CGT event that
involves the sale of a CGT asset with a view to dispose it off permanently to be treated as an
A1 category of CGT event. The time of acquisition of a CGT asset by the holder of the same
is the time when the ownership of the asset has been conferred upon that holder as can be
conceived from s. 109.5 of the ITA Act 97 (Barkoczy 2016).
The exact timing at which the ownership of the picture has been conferred upon Helen is not
what made clear with the facts of the case. The reason behind such an ambiguity is the fact
that the picture has been purchased by her mother. Another factor that needs to be considered
is the timing at which the picture has been purchased. For being subjected to CGT the asset
needs to be purchased on a date after or on 20-09-1985 as any asset purchased in that
prescribed date will be treated as a CGT asset. The loss or gain arising out of such a CGT
event will be required to be computed by subtracting the lower of the cost proceed and cost
base from the other one. In this case the cost base will be $470, which depicts the first
element of the cost base. Being purchased by her mother the picture has came to the
possession of Helen either by succession or by gift. This will require the cost base to be
adjusted with the market value of the existing situation during the acquisition of the same.
The capital proceed gathered amounted to $5000. Being held for more than 1 year a 50%
discount will also be allowed under div 115.
Answer 2
Issue 1

5TAXATION
The matter of concern arising from the provided scenario is whether the amount received by
Barbara from Eco Books Ltd for the purpose of writing the book under the offer will be
treated as an income from personal exertion.
It has been held in the case of Whitaker v Commissioner of Taxation [1998] FCA 262 any
amount conceived from the exertion of personal labour towards the process of income
production will be required to be included as an assessable income of a taxpayer as an income
from personal exertion. S. 6.1 of the ITA Act 36 provides for the definition of income from
personal exertion (Woellner 2010).
The agreement between Barbara and the Eco Books Ltd for the purpose of writing the book
has earned Barbara an amount of $13,000 which can be construed as an income from
personal exertion as Barbara has given her a effort to earn that income. This can be illustrated
with the case of Jarrold v Boustead 1963 41 TC 701.
The copyright pertaining to the book has been sold by Barbara to the Eco Books Ltd for a
price of 13400 dollars needs to be treated as a capital gain as copyright depicts a capital asset.
This can be supported with a case of McCauley v Federal Commissioner of Taxation [1944]
HCA 18.
Barbara has also gained an amount of 4350 dollars and 3200 dollars by selling the
manuscripts of the book as well as the interview to the library. This can be treated as income
from personal exertion can be made evident with the case of Brent v Federal Commissioner
of Taxation [1971] HCA 48.
Issue 2
The matter of concern arising from the given scenario is whether the income from the book
will be treated as income from personal exertion if the book has been written by Barbara in
her spare time and she conceived to sell it afterwards.

6TAXATION
Under tax ruling 97/11 it has been provided that any income arising from a hobby or any
other endeavours relating to such a hobby to be excluded from being impose with taxation.
Hence if Barbara has written the book in her spare time and decided to sell it afterwards she
would not have been imposed with taxation upon the money received from the same
(Woellner 2010).
Answer 3
Whether the amount received by Patrick in the form of the loan repayment made by David
will be treated as an income in the hands of Patrick.
The incomes which are derived from ordinary means will be included in the ordinary incomes
as per the provisions under s. 6.5 of the ITA Act 97. Income will only be subjected to
taxation when it add something to the assessable income of the taxpayer (Woellner 2010).
Any gain that possesses the quality of income will be considered as an income for the
purpose of taxation. This can be explained with the case of Hochstrasser v Mayes 1960 AC
376.
For being treated as an income, which is subject to taxation, an amount of money receivable
needs to be conceived as a real gain which a taxpayer derives from a transaction. This can be
supported with the case of Federal Wharf Co Ltd v. DFC of T (1930) 44 CLR 24.
In the instant scenario, an amount of $52,000 husband provided as a loan by Patrick to his
son David. The loan has been agreed to be repaid after the lapse of 5 years and the amount to
be repaid is $58,000. This needs to be treated as a gain for Patrick as an additional amount of
$6,000 was agreed to be received from the extension of the loan. Again at the end of 5 years
an additional 5% has been repaid by David along with the loan amount. Although there has
been no interest being agreed upon the loan, the additional payment made by David has
attached a benefit towards the assessable income of Patrick.

7TAXATION
Hence, the amount received by Patrick in the form of the loan repayment made by David will
be treated as an income in the hands of Patrick.
Reference
Brent v Federal Commissioner of Taxation [1971] HCA 48
Federal Wharf Co Ltd v. DFC of T [1930] 44 CLR 24
Hochstrasser v Mayes [1960] AC 376
Jarrold v Boustead [1963] 41 TC 701
McCauley v Federal Commissioner of Taxation [1944] HCA 18
Tax Ruling 97/11
The Income Tax Assessment Act 1936 (Cth)
The Income Tax Assessment Act 1997 (Cth)
Whitaker v Commissioner of Taxation [1998] FCA 262
Barkoczy, S., 2016. Foundations of taxation law 2016. OUP Catalogue.
Woellner, R.H., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2010. Australian taxation
law. CCH Australia.