Taxation Consequences of Selling Antique Painting, Historical Sculpture, Antique Jewellery, and Picture

This document discusses the taxation consequences of selling antique painting, historical sculpture, antique jewellery, and picture. It explains the CGT assets, capital gain events, and cost base calculations. It also addresses the tax implications of income received from writing a book and loan repayment.

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

1TAXATION
Question 1
1
Capital gain tax consequences surrounding the sale of antique painting which Helen has
made.
Any dealings that involves a transaction disposing of antique painting will be required to
included in the assessment as a collectible which is a CGT asset in section 108-10 ITA Act
97. Any CGT gain or CGT loss evolving from a particular transaction provided in section
102-10 of the ITA 97 needs to be appended with a CGT event as the provisions of section
104-5 of the ITA Act 97. Out of the various categories relating to capital gain events the sale
of assets will come under the A1 category pertaining to the list of capital gain events as
contained in section 104-5 of the ITA Act 97. However the point of time during which the
acquisition has occurred is the time when ownership has been transferred in favour of the
taxpayer as per section 109-5 of the Act.
The particulars of this case does not specifies the exact time where the acquisition has been
made by Helen in relation to the painting. This inconvenience has occurred as the painting
was actually purchased by the father of Helen. Capital assets will only be regarded as a
component of CGT liability if such an asset has been purchased subsequent to 20-09-1985. If
it can be establish that the acquisition has not been made prior to this date, the asset in
question will be allowed as a CGT asset. The painting can be treated as a collectible as it has
complied with date requirement. A gain or loss of capital origin can be calculated by making
a deduction of the lower of the cost proceed and the cost base from the other one. The cost
base of the painting is $4,000. Again the painting was acquired by Helen’s father and Helen
has assumed ownership either by succession or gift. This will require the cost base to be
adjusted with respect to the market value of prevailing at the time of acquisition. The capital

2TAXATION
proceed accrued was $12,000. Moreover, a discount of 50% for holding the asset for more
than one year has also been allowed.
2
Capital gain tax consequences surrounding the sale of historical sculpture which Helen has
made.
Any dealings that involves a transaction disposing of historical sculpture will be required to
included in the assessment as a collectible which is a CGT asset in section 108-10 ITA Act
97. Any CGT gain or CGT loss evolving from a particular transaction provided in section
102-10 of the ITA 97 needs to be appended with a CGT event as the provisions of section
104-5 of the ITA Act 97. Out of the various categories relating to capital gain events the sale
of assets will come under the A1 category pertaining to the list of capital gain events as
contained in section 104-5 of the ITA Act 97. However the point of time during which the
acquisition has occurred is the time when ownership has been transferred in favour of the
taxpayer as per section 109-5 of the Act.
The particulars of the case suggest that the sculpture has been purchased in the month of
December of 1993. Capital assets will only be regarded as a component of CGT liability if
such an asset has been purchased subsequent to 20-09-1985. If it can be establish that the
acquisition has not been made prior to this date, the asset in question will be allowed as a
CGT asset. The sculpture can be treated as a collectible as it has complied with date
requirement. A gain or loss of capital origin can be calculated by making a deduction of the
lower of the cost proceed and the cost base from the other one. The cost base of the sculpture
is $5500. The capital proceed accrued was $6000. Moreover, a discount of 50% for holding
the asset for more than one year has also been allowed. The capital gain in this case is $500.
3

3TAXATION
Capital gain tax consequences surrounding the sale of antique jewellery which Helen has
made.
Any dealings that involves a transaction disposing of antique jewellery will be required to
included in the assessment as a collectible which is a CGT asset in section 108-10 ITA Act
97. Any CGT gain or CGT loss evolving from a particular transaction provided in section
102-10 of the ITA 97 needs to be appended with a CGT event as the provisions of section
104-5 of the ITA Act 97. Out of the various categories relating to capital gain events the sale
of assets will come under the A1 category pertaining to the list of capital gain events as
contained in section 104-5 of the ITA Act 97. However the point of time during which the
acquisition has occurred is the time when ownership has been transferred in favour of the
taxpayer as per section 109-5 of the Act.
The particulars of the case suggest that the jewellery has been purchased in the month of
October of 1987. Capital assets will only be regarded as a component of CGT liability if such
an asset has been purchased subsequent to 20-09-1985. If it can be establish that the
acquisition has not been made prior to this date, the asset in question will be allowed as a
CGT asset. The jewellery can be treated as a collectible as it has complied with date
requirement. A gain or loss of capital origin can be calculated by making a deduction of the
lower of the cost proceed and the cost base from the other one. The cost base of the jewellery
is $14000. The capital proceed accrued was $13000. Moreover, a discount of 50% for
holding the asset for more than one year has also been allowed. The capital loss in this case is
$1000.
4
Capital gain tax consequences surrounding the sale of picture which Helen has made.

4TAXATION
Any dealings that involves a transaction disposing of picture will be required to included in
the assessment as a collectible which is a CGT asset in section 108-10 ITA Act 97. Any CGT
gain or CGT loss evolving from a particular transaction provided in section 102-10 of the
ITA 97 needs to be appended with a CGT event as the provisions of section 104-5 of the ITA
Act 97. Out of the various categories relating to capital gain events the sale of assets will
come under the A1 category pertaining to the list of capital gain events as contained in
section 104-5 of the ITA Act 97. However the point of time during which the acquisition has
occurred is the time when ownership has been transferred in favour of the taxpayer as per
section 109-5 of the Act.
The particulars of this case does not specifies the exact time where the acquisition has been
made by Helen in relation to the picture. This inconvenience has occurred as the picture was
actually purchased by the mother of Helen. Capital assets will only be regarded as a
component of CGT liability if such an asset has been purchased subsequent to 20-09-1985. If
it can be establish that the acquisition has not been made prior to this date, the asset in
question will be allowed as a CGT asset. The picture can be treated as a collectible as it has
complied with date requirement. A gain or loss of capital origin can be calculated by making
a deduction of the lower of the cost proceed and the cost base from the other one. The cost
base of the picture is $470. Again the picture was acquired by Helen’s mother and Helen has
assumed ownership either by succession or gift. This will require the cost base to be adjusted
with respect to the market value of prevailing at the time of acquisition. The capital proceed
accrued was $5000. Moreover, a discount of 50% for holding the asset for more than one year
has also been allowed.
Question 2
1st issue

5TAXATION
The determination of the fact that whether the income received by Barbara under the offer by
Eco Books Ltd to write a book.
Any income that comes back as a result of personal effort applied by the taxpayer with the
motive to manufacture income will be rendered as an income from personal exertion. This
can be explained principles established in the proceeding of Allied Mills Industries Pty Ltd v
FCT (1989) 89 ATC 4365. The definition of income that can be derived from personal
exertion has been provided under section 6-1 of the ITA Act 36.
As established through the principles discussed in the case of Hobbs v Hussy (1942) TC 153,
an income that has resulted from an application of personal exertion will be taxed as income
from personal exertion. This renders the receipt of $13,000 by Barbara to be an income from
personal exertion as Barbara has applied her efforts for writing the book on being offered by
Eco Books Ltd.
It is an established facts under the case of Brent v Federal Commissioner of Taxation [1971]
HCA 48 that copyright is a capital asset and any receipt received against it will be treated as a
capital gain. Hence the selling of the copyright by Barbara to the company for a price of
13400 dollars will be subject to tax as a CGT gain.
It has been made evident from the case of Housden v Marshall (1958) 519that the manuscript
of a book when sold will pertain to the taxpayer income from personal exertion. Hence the
selling of manuscripts of the book to the library of the company foreign amount of 4350
dollars will be regarded as an income from personal exertion.
Applying the same principle it can be stated that the income of $3200 from the same of the
manuscripts of the interview to the library of the company will be treated as an income from
personal exertion.
2nd issue

6TAXATION
Whether the same tax consequences will follow if the book has been written by Barbara as a
hobby.
Any income that a person has earned by virtue of a hobby will not be included in the taxable
income. This can be made evident by the provisions of Tax Ruling 97/11.
Hence in the present case if the book has been written by Barbara was importance of a hobby
it would not have implied into taxability.
Question 3
Whether amount of money Patrick received against loan paid will be treated as an income
which can be subjected to taxation.
Only those receipts that attaches something beneficial to the taxable income of a taxpayer
will be treated as a income that can be brought under the purview of taxable income. This has
been discussed in the case of Hochstrasser v Mayes (1960) AC 376.
Again under section 6-5 of the ITA Act 97 any income derived from ordinary concepts will
be assessable income in the hands of the taxpayer. To be considered as a taxable income any
amount received need to attach some monetary value to the taxpayer as well as comply with
all the essentials of income. This can further be supported with the case of Jarrold v Boustead
1963 41 TC 701.
In the present case the loan amount was $52,000 and under the agreement between David and
Patrick, David required to return amount of $58,000. This shows an additional $6000 to be
payable Patrick over the loan amount. As agreed between them no interest will be payable
after the conclusion of five years except for the amount agreed. However at the end of 5 years
an additional 5% has been paid by David against the loan along with the loan amount. This

7TAXATION
will be required to be treated as a gain which has added a monetary value Patrick. Hence this
will be included in the assessable income of Patrick.
Hence the amount of money Patrick received against loan paid will be treated as an income
which can be subjected to taxation.

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
Housden v Marshall (1958) 519
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)