Taxation Theory, Practice and Law

Running head: TAXATION THEORY, PRACTICE AND LAW
Taxation Theory, Practice and Law
Name of the Student:
Name of the University:
Author’s Note:
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1TAXATION THEORY, PRACTICE AND LAW
Table of Contents
Answer to Question 1:.......................................................................................................2
Transaction 1:................................................................................................................2
Transaction 2:................................................................................................................2
Transaction 3:................................................................................................................2
Transaction 4:................................................................................................................3
Answer to Question 2:.......................................................................................................3
Issues:............................................................................................................................3
Rule:...............................................................................................................................3
Application:.....................................................................................................................4
Conclusion:.....................................................................................................................5
Answer to Question 3:.......................................................................................................5
Issues:............................................................................................................................5
Rule:...............................................................................................................................5
Application:.....................................................................................................................5
Conclusion:.....................................................................................................................5
References:........................................................................................................................6

2TAXATION THEORY, PRACTICE AND LAW
Answer to Question 1:
Transaction 1:
It is evident from the “Section 100-25 (1) of ITAA 1997” that there is restriction
of capital gains tax on the assets to which they are applied and on those asset bought
on or after 20th September 1985. Until 21st September 1999, tax application is made
only for real gains in accordance with the regimes of the capital gains tax (Barkoczy
2016). Owing to this, the cost base related to the capital gains tax asset has been
indexed for inflation purpose; in case, the CGT asset has been held for above a year.
The assets bought before 20th September 1985 and gains obtained from the same are
not entitled to CGT owing to the exemption of assets.
In this situation, Helen has purchased antique painting before 20th September
1985. On February 1985, the painting is bought, which is prior to the initiation of CGT.
However, the painting has been sold in the month of December in 2018. The asset was
bought at an amount of $4,000 and the selling value of the asset has been $12,000.
Therefore, the sale of painting has resulted in capital gain. Since the asset was
purchased prior to the initiation of the CGT, it could be categorised as pre-CGT asset
and thus, Helen is exempted from capital gains in this situation.
Transaction 2:
The application of CGT provision is made on realised or actual gains. In
accordance with “Section 102-5 (1) of ITAA 1997”, the taxpayer has to incur tax on
capital gains, as they are statutory income and the same would be included in the
assessable earnings of the taxpayer. The CGT asset disposal is related to “Section
104-10 of ITAA 1997” (Boadway and Tremblay 2016). After the sale of the CGT events,
the CGT event A1 takes place. Collectable implies items likes antiques, rare books,
sculptures and jewellery mentioned in “Section 108-10 (2) of ITAA 1997”, which is
used for self-enjoyment.
$5,500 was incurred for buying an art work as sculpture. In 2018, the same was
sold for an amount of $6,000. This sculpture could be adjudged as a collectable item in
compliance with “Section 108-10 (2) of ITAA 1997”. By selling the sculpture, there has
been creation of CGT event A1 in accordance with “Section 104-10 of ITAA 1997”. The
capital gains obtained is deemed to be taxable in the form of statutory income within
“Section 6-10 of ITAA 1997” and this would be incorporated in the assessable income
of Helen depending on “Section 102-5 (1) of ITAA 1997”.
Transaction 3:
According to “Section 108-10 (1) of ITAA 1997”, capital loss from collectables
could be used for minimising the capital gains earned from other collectables
(Braithwaite 2017). This denotes that the amount remaining from capital loss is brought
forward to the later years in accordance with “Section 108-10 (4) of ITAA 1997”. In this
situation, the taxpayer is Helen and she has purchased jewellery amounting to $14,000.
On selling the jewellery in March 2018, Helen has incurred a loss of $1,000 from the
actual purchase price. By complying the regulation mentioned in “Section 108-10 (4) of
ITAA 1997”, it is necessary to reduce the capital loss by offsetting the same against the
capital gain made from the sculpture. Based on “Section 108-10 (4) of ITAA 1997”, the