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Taxation theory TAXATION THEORY Answer 1 For over twelve months Eric has bought some assets which have not been mentioned in the time span exceeded

   

Added on  2019-10-30

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TAXATION THEORY

Taxation theoryAnswer 1For over twelve months it is seen that Eric has bought some assets in which the time span has not been mentioned. This depicts that the assets have been kept in place for less than twelve months. Also if the matter regarding the capital gain tax is considered then it can be said that it is only applicable if the time span has been exceeded (Fullerton et. al, 2017). Thus, it can be said that because the time span has not exceeded twelve months so the fact of applying the tax cannot be taken into attention. For the implementation of capital gain, it is essential that the time span should be crossed that determines the status. Computation of net capital gain or loss: The division of the assets as per as per their value:Assets for personal useThese are the assets that are bought for self-benefits. But for the sales of these types of assets the capital gain tax is not applicable if the amount of the assets in more than $10000. In this case, also we can see that Eric purchased a home sound theatre for $12000 and so it is free of the capital gain tax. The assets that are utilized for the personal use are outside the purview of the capital gain tax (Fullerton et. al, 2017).CollectiblesAs per this topic, the assets bought for self-enjoyment and for personal use are not taken under the section of capital gain taxability if the value of the asset is more than $500. Here we can see that Eric had the following assets for painting ($9000), antique chair ($3000), and antique vase ($2000) respectively.Investment An investment of $5000 is made in a reputed company by Eric that must also be taken into account as per the calculation of the capital gain. As it is an investment, therefore, should be taken into consideration.The given formula is to be used in the case for which the evaluation of the capital gain tax is done.Capital gain = Capital Proceeds less the base cost of assets. DetailsBase cost of the assetAssets capital proceedsNet Capital Gain/LossHome Sound System12,00011000(1000)2

Taxation theoryPainting 9,0001000(8000)Antique Vase 2,00030001000Antique Chair 3,0001000(2000)Listed company’s shares 5,0002000015000TotalNet capital gain=5000 Notes:Assets kept in storage for personal use are bought exceeding $10000 and thus, they are considered for evaluation of capital gain.Assets kept in storage by Eric in the form of collectibles exceeding for more than $500 and thus, they are paid attention for evaluation of capital gain (Latimer, 2012).As to evaluate net capital profit or loss, set-off of capital losses is in tune with the capital gain3

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