Taxation of Palm Tree Cutting and Sale

The assignment delves into the tax considerations surrounding the cutting and sale of palm trees. It investigates whether the activity is considered a forest operation, which would have different tax implications than individual income. The report concludes that if individuals appoint someone to cut trees for them with no focus on earning profits, it may not be included under forest operations. However, if the purpose is to earn money by selling trees, it should be taxed as forest operations. This assignment provides a detailed analysis of the relevant tax regulations and considerations.

Taxation Theory, Practice & Law

Table of Contents
Question 1........................................................................................................................................1
Introduction.................................................................................................................................1
Critical analysis:..........................................................................................................................1
Supporting Evidence:..................................................................................................................1
Conclusion:.................................................................................................................................2
Question 2........................................................................................................................................2
Introduction.................................................................................................................................2
Critical analysis:..........................................................................................................................2
Supportive evidence:...................................................................................................................3
Conclusion:.................................................................................................................................3
Question 3........................................................................................................................................3
Introduction.................................................................................................................................3
Critical analysis...........................................................................................................................4
Supporting evidence:...................................................................................................................4
Conclusion...................................................................................................................................4
Question 4........................................................................................................................................4
Introduction:................................................................................................................................4
Critical analysis:..........................................................................................................................4
Supporting evidence:...................................................................................................................5
Conclusion...................................................................................................................................5
Question 5........................................................................................................................................5
Introduction.................................................................................................................................5
Critical analyses..........................................................................................................................5
Supporting evidence....................................................................................................................5
Conclusion...................................................................................................................................5

Question 1
Introduction
Capital gains or losses are calculated on the basis of scales which are analysed after
selling all assets. It can arise for long or short terms. If the property are kept with owner more
more than 2 years than it results in achievement of long term gains. Thus all tax are applicable
after analysing cost used in acquisition and then it is paid (Antwi-Agyei and et. al., 2012). If
assets are used for less then 2 years thus taxes are paid directly.
Critical analysis:
According to given case Eric had acquired assets before 12 months. This implies that
person have to pay tax for short time duration. The assets which are acquired by Eric are
evaluated in the below table as:
Particulars Acquired Sale Profit/ loss
Antique base 2000 3000 1000
Antique chair 3000 1000 -2000
Painting 9000 1000 -8000
Home sound system 12000 11000 -1000
Shares 5000 20000 15000
Total (Profits) 5000
From the above table it can be said that Eric had gained profits of $5000 by disposing
their overall assets. All the assets which are used personally and are depreciated will not be libel
to pay any kind of taxes for them. Eric have to pay tax only on their new profits.
Supporting Evidence:
In relation to guides which are used as personal investors and capital profits on taxes of
2016. The capital gains can only be received by selling their shares (Baldwin, Cave and Lodge,
2012). According to norms if any persons are disposing their capital assets and using it to
achieve capital profits, in this situation persons have to prepare reports of their capital loss or
profits under his returning and he have the liability to pay taxes over their profit ratios. But if
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there are any losses then persons are not libel to claim any amount in relation to their income but
individuals can easily apply them to reduce capital profits. In relation to tax norms all the assets
which are acquired before 20 September year 1985 have to pay CGT till they are not having
special permission to exclude them.
Some of the personal assets are exempted under CGT and this cannot be applied in
depreciating assets involved in tax paying. Thus taxes are not applied on all the above personal
assets which are depreciated.
Conclusion:
From the report it can be concluded that all the capital gains have to paid according to
rules of income tax. All the disposing income should be accessed and valued after this cost
related with acquisition should be reduced in effective ways.
Question 2.
Introduction
Fringe benefits is an additional benefit which is paid by employers to their workers.
These are not included in salary of person. These cost are variable from income tax and are
mostly calculated on taxing cost which are analysed from fringe benefits. According to the case
the loans of fringe benefits are described below (Bisong and Rahman, 2011). Brains employers
are providing loan amount for three year which was $1million @1% per annum. This cost is
lower then the actual benchmarking rates.
Critical analysis:
The case states that employer of Brain had given loan at 1% interest rate. This cost is
lesser while compared with industry rates. Thus taxes are paid on it. Statutory rates in 2016/2017
year are 5.65%. Thus all the fringe benefits on which tax are liable are calculated by analysing
difference between statutory and actual interest rates. In respect to this all the fringe benefits are
measured by the actual rate of interest. The final cost of fringe benefits will be 2016/2017 year is
5.65%
The calculation of tax are described as:
Phase Actions Results
1 The sum of money that is taxable under (fringe
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benefit)
 Actual rate of interest is
 Statutory rate of interest
 Final amount of fringe Benefits
$1,000,000*1%=$10,000
$1,000,000*5.65%=$56,500
$56500-$10000=$46,500
2 The amount which are taxable on fringe benefits
(While no interest is charged)
$1,000,000*5.65%=$56,500
3 If Brian agree to pay taxes with actual market rate,
the he can apply for $22600 as a deduction
$56,500*40%=$22600
4 According to income tax payment will be made as $10,000*40%=$4000
5 If we deduct step 4 from 3, as to gain assessable
taxable amount.
$22600-$4000=$18600
If the rate of interest is paid on monthly basis then the total sum of amount is divided by
1 year i.e. 12 months. EMI is calculated by this way. This amount which is generated is different
from annual amount.
In third step if bank give loans which are free from interest rates, then net fringe benefits are
gained as:
$1,000,000*5.65%=$56,500
$56,500*40%=$22600. henceforth, $22600 would be the net fringe benifits.
Supportive evidence:
According to tax policy of fringe benefits, FB taxes values are calculated as the total cost
under which the national cost exceed the initial cost of interest falling on loans (Bodie, 2013).
Each and every loans are calculated in different ways according to their norms.
Conclusion:
It is said that fringe benefits are additional payment received by employees. As per the
case $ 18600 is the total sum amount which is applied from taxable amount. If there is no
additional amount which is calculated as interest then fringe benefits have been $ 22600
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Question 3
Introduction
The case is about a husband and his wife named as Jack and Jill they have borrowed a
sum of money to buy property on rent. These persons have agree to sign a contract in which the
profit ratios will be divided among ratios of 90:10 and if there is any losses these had to be beard
by only one person jack. The contract was helpful in avoiding factors which were linked with
paying tax liabilities. Last year, they have faced loss as property arose $10000 loss.
Critical analysis
According to case both persons have made contract in order to remove tax liabilities. Jill
is housewife and she is not earning thus dependent and her income is clubbed under assessment
of Jack. The covenant is assigned in order to reduce tax liabilities and income which is earned is
covered under Jack. If there is any losses then it had to be forwarded in coming year. If they wish
to sell the property then they can have capital gains or losses and this will include under Jack
capital income (Brink, 2017). Jill is not libel to pay taxes over her capital profits but Jack had to
pay the tax.
Supporting evidence:
According to law of nation, a person is not liable to take benefits for which she is not
accountant to pay any amount. Thus no form of tax are paid on capital profits which they are
entitled to get. Thus all taxes are to be paid by Jack only (Capital gain tax on property, 2017).
Conclusion
From the above case it is analysed that Jack is having capital loss as he decide to sell his
initial property.
Question 4
Introduction:
According to case of Duke of Westminster's case which was supported by tax avoidance. There
was a deed based on legal document of valence which had list of servants who were gardeners,
national helpers etc. Under thus Duke decided to gave some amount to hid worker who was
having responsibility to taker care of garden. There was an agreement made so as to give
payment to employee on monthly basis but he failed to do so. This was done in order to save
taxes (Evers, Miller and Spengel, 2015).
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Critical analysis:
Deed is described as legal documents which are signed with the wish of 2 to 3 persons with their
mutual consent. It is used in order to transfer properties. The relation among deed and contract is
that deed is agreement in written formats which have to be signed by both persons and it had to
be standing in front of third party. Agreements re in written formats and deed are unenforceable
by laws.
Supporting evidence:
The laws implies the valuable legal proceeding while persons are avoiding taxes. There was an
opinion given by Lord Tomlin who says that person have right to reduce taxes and it is not
against the law (Jiang and Shao, 2014). According to Ramsay if persons are finding illegal ways
to save tax then it has to face liability by paying the whole amount.
Conclusion
From the above report it is analysed that if effective ways are adopted to reduce taxes
than it is not illegal.
Question 5
Introduction
It is very crucial to determine amount which will be paid as tax while selling trees. It can
be classifies as money which is received from agriculture sector or it can be act of generating
higher revenues. Bills was the owner of land which was full of palm trees. The areas has to
cleared so that animals can graze there. For this he gave responsibility to a firm who will charge
$ 1000 for clearing each area of 100 square.
Critical analyses
The amount received by selling timber was counted as income which had to be paid in
taxes. The owner was paying money to Logging company in return of land clearing. This
situation is valuable for Bill as his land will be used for animals (Guenther, 2014). He was
involved in a business because company was cutting and taking timber along with them. This is
termed as loyalty as he is not involved in selling trees top another person. He was liable to pay
taxes thus achieving capital profits.
Supporting evidence
According to TR 95/6 if persons are involved to cut trees and selling them in return of
money then it is included under income of individuals. The main aim of Bill is to clear land and
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he was not focused on earning profits or monetary value, thus it is not included under forest
operation.
Conclusion
The above report states that if individuals appoint person to cutting trees then income
gained from selling palm trees are calculated under forest operations.
REFERENCES
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