The Tax Compliance Costs of Large Corporations - PDF

Running head: TAX
Tax
Name of the Student:
Name of the University:
Authors Note:

1TAX
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................7
Reference..................................................................................................................................10

2TAX
Answer to Question 1
Issues:
In the present case, the company has been in the business of renovations for the last
30 years. After that, it was faced with a downturn in the market and sought to look for new
sources of income. Hence, it purchased old houses in the city, renovated them, and leased
them out for high rents. In the current year that is for the current tax year the company has
reinstated its old functions and sold the assets held by it. Due to the sale of the assets held by
the company, a huge profit was earned by the company1. Following is the analysis of the
virus laws and regulations relating to the ordinary income and the capital gain tax prevalent
in the country. After considering all the relevant provisions of the law applicable in the
present scenario a conclusion is given in respect of the tax treatment that has to be initiated in
respect to the present transaction of the company.
Laws:
Ordinary income 6(5)
The income according to the accounting concept is known as the ordinary income. The
meaning of the ordinary income is a lot dependent on the natural meaning of the words. In
1 Burkhauser, Richard V., Markus H. Hahn, and Roger Wilkins. "Measuring top incomes
using tax record data: A cautionary tale from Australia." The Journal of Economic
Inequality 13, no. 2 (2015): 181-205.

3TAX
addition to that, it depends on the natural interpretation by the court2. The three attributes of
an ordinary income are as follows:
a) The amount or a part of the total amount being classified as accrued in respect of the
taxpayer due to the conduct of business by him.
b) The amount or part of the amount has accrued to the taxpayer from the services that
have been rendered by him to some other entity.
c) The income that is to be classified is received as a compensation for foregoing an item
that would have resulted to the inflow of income for the taxpayer presently or in the
future.
There are other parameters too in relation to which the amount is measures so as to establish
whether it is an income or not. They are as follows:
a) Is the amount to be classified has been actually received by the tax payer.\
b) Is the nature of the income is to occur regularly or periodically.
c) Has the income accrued from the use of any asset?
d) Is the income a result of the compensation received for the loss of income earned by
the taxpayer?
e) Is the amount or item received by the taxpayer convertible into cash or not.
Statutory income 6 (10):
As per the provisions of this section the income that are not ordinary income are termed as
statutory income.
2 Becker, Johannes, E. Reimer, and A. Rust. Klaus Vogel on Double Taxation Conventions.
Kluwer Law International, 2015.