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Taxation Theory, Practice and Law | Assignment

   

Added on  2020-11-12

21 Pages3285 Words273 Views
Taxation Theory,Practice & law

Table of contentsINTRODUCTION...........................................................................................................................1QUESTION 1...................................................................................................................................1Determining the net capital gain of client..............................................................................1Question 2........................................................................................................................................2Advising jasmine in analysing FBT on various assets...........................................................2Analysing the tax consequences as per loan amount will be used by jasmine in purchasingsecurities.................................................................................................................................7CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9

INTRODUCTION Taxation theories and laws were developed by the government, includes lots of taxeswhich should be practice in the organization. The assignment is based on taxation theory andpractice law. Various taxes which are payable and not payable by the employees in organizationare consisted by the taxation theories. Tax in country were introduced to defend the nation and tomaintain the institution of good government for the benefit to public. The net capital gain andcapital loss according to the information provided in the scenario will be presented in thisassignment. The study of this report will give the information about the fringe benefits tax withthe steps to solve. The study has evaluated the fringe benefit tax liability in tax credit relation.Further, assignment will provide the non-fringe benefit amount for the provided information. QUESTION 1Determining the net capital gain of client.The amount of profit ascertain from sale of different assets like stock, real state, bond iscalled capital gain. The amount is said to be capital gain when selling price of capital gainexceeds its purchase price. The capital gain is identified when the selling price is more than thecost price of the particular goods. . This profit is counted as an income of the payee andtherefore, tax is charged for the year at which transfer of the capital \takes place . The capitalloss is just opposite to it. It arises when the selling price of the asset is lower than its purchaseprice. Capital gains are of two types realized capital gain i.e. this investment which is sold forthe profit which is obtain from the investment and another one is unrealized capital gain, whichis not sold yet, but can earn profit when they are sold. The information and the calculation of capital gain with its interpretation has beendiscussed. Block of vacant land The contract has been done to sell the block of vacant land for $320000 in 3 June ofcurrent. The client has taken this land on January 2001 for $100,000 and done $20000 extraexpenses on waste rates land taxes etc. at the time of her ownership. According to the contract ofsale, client has got amount $20000 at time of signing agreement and remaining amount is to begiven on 3rd January of the next tax year. The capital gain for its sale of land was calculatedunder in the table. 1

Interpretation: The calculation of capital gain is done above in the table. In this the evaluation of costbased index has been done by taking purchase price and additional charges occurred at the timeof sale into consideration. The purchase price of the land was $100000 in 2001 and at the time ofselling has incurred additional charges for $20000. So, the cost base unindexed was $120000.after selling she get the amount of $320000 and from that the cost base index has been deductedto obtain the gross capital gain. As per the section 54b, the asset which are inherited after 11:45am on 21st September, 1999, the discount model apply. In this the exemption is given only in halfof the amount of capital which is $100,000. Antique bed2

The bed has been purchased by client for $3500 on 21st July, with its insurance. Inpresent year, market value of bed is $25000, which was stolen from her house. She has nowclaimed for insurance and for that, she has received $11000. calculation of capital gain is done inthe table InterpretationThe calculation of capital gain is done by taking purchase price and additional charges ofinsurance claim into consideration. In first step, calculation of cost based index is done for 12November. The purchase price of bed was $10,157.22 and after adding additional expenses of$4011.88, by including indexation rates the total cost based index incurred is 14169.09 in currentyear on 21st January, the insurance claim was received for $11000. The gross capital gain was$11000. As per the section, the property purchased before 11:45 am on 21st September 1999 theindexation model will be applicable. 3

PaintinIn this scenario, the painting from famous artist has been purchased by client for $2000on 2nd May, 1985. The price of the painting has taken rise from sudden demise of artist. Theclient decided to sell painting in an auction for $125,000 on April 3rd of present year.Calculation of capital gain obtained from sale of painting is calculated under-Interpretation: In this case, as per the calculation is done, it is feasibly identified that on May 1985,when she purchased the painting the price of that painting was $2000 including indexation modelrate, amounts $5941.95. When she decided to sale it in April 2018, the painting amounted to her$125,000. She has received the capital gain of $ 119058.05. As per the section the propertypurchase before 11:45 am on 21st September 1999 the indexation model will be applicable. Shares The scenario depicts substantial share portfolio received by clients many years ago. Thecalculation of capital gain of client received from issue of share has been calculated under. 4

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