Business Law Assignment: Income Tax and Capital Gains Analysis - Law

This business law assignment analyzes three key questions related to taxation and income. The first question assesses the capital gains of Helen from selling collectible items such as an antique painting, historical structure, and antique jewelry, applying the relevant sections of ITAA97 to determine capital gains or losses. The second question examines the nature of various payments received by Barbara from Eco Books, determining whether they constitute income from personal exertion, referencing ITAA36 and relevant case law. The third question addresses whether an excess payment received by Patrick from his father is considered assessable income, referencing the concept of income gain and relevant case law. The assignment demonstrates the application of tax law principles to practical scenarios, determining tax liabilities and income classifications.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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BUSINESS LAW
Table of Contents
Question 1......................................................................................................................2
Question 2......................................................................................................................3
Question 3......................................................................................................................5
References......................................................................................................................7
References......................................................................................................................8

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Question 1
Part 1
The issue is to ascertain the capital gain of Helen by selling her antique painting.
The antique painting is a collectible item and thus shall be treated as a CG according section
108-10(2) of ITAA97. A CG Asset is formed when a CGT event takes place as mentioned
under 102.2 of ITAA97. The asset is acquired as soon as the TP derives the ownership as per
section 109-5(1).
Barbara acquired the antique painting from her father which was purchased on 20th
September 1985, when CGT was not prevalent. The CB will be the price with which the
product is bought, which is $4000 here. While, the capital proceed shall be selling price,
which is $12000 here. Therefore, the CG shall be capital proceed minus CB.
Part 2
The issue is to ascertain the capital gain of Helen by selling her historical structure
The historical structure is a collectible item and thus shall be treated as a CG
according section 108-10(2) of ITAA97. A CG Asset is formed when a CGT event takes
place as mentioned under 102.2 of ITAA97. The asset is acquired as soon as the TP derives
the ownership as per section 109-5(1).
Barbara acquired the historical structure which was purchased on December 1993,
when CGT was prevalent. The CB will be the price with which the product is bought, which
is $5500 here. While, the capital proceed shall be selling price, which is $6000 here.
Therefore, the CG shall be capital proceed minus CB.
Part 3
The issue is to ascertain the capital gain of Helen by selling her antique jewellery

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The antique jewellery is a collectible item and thus shall be treated as a CG according
section 108-10(2) of ITAA97. A CG Asset is formed when a CGT event takes place as
mentioned under 102.2 of ITAA97. The asset is acquired as soon as the TP derives the
ownership as per section 109-5(1).
Barbara acquired the antique jewellery from her father which was purchased in
October 1987, when CGT was prevalent. The CB will be the price with which the product is
bought, which is $14000 here. While, the capital proceed shall be selling price, which is
$13000 here. Therefore, the CL shall be capital proceed minus CB. This CL shall be treated
as an offset which will be carried forward to the next year.
Part 4
The issue is to ascertain the capital gain of Helen by selling her painting.
The painting is a collectible item and thus shall be treated as a CG according section
108-10(2) of ITAA97. A CG Asset is formed when a CGT event takes place as mentioned
under 102.2 of ITAA97. The asset is acquired as soon as the TP derives the ownership as per
section 109-5(1).
Barbara acquired the painting from her father which was purchased post 20th
september 1985, when CGT not prevalent. The CB will be the price with which the product is
bought, which is $470 here. While, the capital proceed shall be selling price, which is $5000
here. Therefore, the CG shall be capital proceed minus CB.
Question 2
Issue
The issue is to ascertain the status of the different payments received by Barbara from
Eco books, whether or not they are income earned from personal exertion.

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Law
The provisions for the income incurred from personal income is laid down under
section 6 of the ITAA36, involving income that are received as salary, wage, commission,
remuneration, incentive, et cetera. It includes the payment received by an employee from his
employment, earnings of a businessman from his business or from a partnership firm shall be
considered as income from personal exertion and shall be considered as a taxable income.
However, as seen in in Blank v Federal Commissioner of Taxation [2015] FCAFC 154 2015
ATC 20-536 to apply this provision, it must be established that there is a close connection
among the income from personal exertion and the tax payer.
As per section 6.5 of ITAA97, an assessable income is an ordinary income within the
ordinary meaning. Assessable income refers to the income derived from any source of one’s
employment, whether or not he was in the country.
Copyright is considered as a CGT and it is taxable. An income incurred from the sale
of a copyright will be regarded as a CGT as well. However, in the case of Commissioner of
Taxation (Cth) v Whitfords Beach Pty Ltd [1982] HCA 8 it was held that an income incurred
from selling a copyright that was taken acquired for personal reasons shall be regarded as an
ordinary income.
Application
Barbara was assigned by Eco books Co for writing a book in exchange of an amount
of $13000 which is to be ascertained as an income incurred from personal exertion as per
section 6 of ITAA36.
Barbara received $13400 for selling her copyright of the economics books that she
wrote for Eco books co which shall be ascertained as CGT and thus shall be taxable, as the
copyright was sold after the books got published.

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Barbara received $3200 for selling her collected interview manuscripts to Eco books
co which shall be ascertained as CGT and thus shall be taxable and it shall be ascertained as
an income from personal exertion
Barbara received $4350 for selling her manuscript of the economics book that she
wrote for Eco books Co which shall be ascertained as CGT and thus shall be taxable and it
shall be ascertained as an income from personal exertion.
If the book was written by Barbara in her spare time and then sold to Eco books Co, it
would have still be considered as CGT asset and the income received from it would have
been ascertained as income from personal exertion.
Conclusion
Therefore, the payments received by Barbara from Eco books Co shall be ascertained
as income from personal exertion.
Question 3
Issue
The issue is to ascertain whether the excess amount received by Patrick shall be
considered as assessable income.
Law
As seen in Hochstrasser v Mayes 1960 AC 376, a gain has to be made for claiming a
receipt pertaining to an income of a person. A receipt received by a person is to be considered
as an income which would be held for taxable income as held in Jordan CJ in the Scott v
Commissioner of Taxation (NSW) 1935 35 SR NSW 215. It is been observed that an income
must match up to the relevant provisions in order to be a receipt of payment.

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The tax payer must establish that he is treating the payment as a gain, in order to pose
the receipt as an income, as held in Countess of Bective v Federal Commissioner of Taxation
1932 47 CLR 417. Section 6.5 of ITAA97 states an ordinary income is the one which has
been derived from ordinary sources.
Application
In this case Patrick had taken a loan from his father David for starting a business and
thereby paying it back after 5 years and the payback would be $58000, however he did not
ask for a deposit amount for the money borrowed and there was no written agreement
between them as well. At this point, the transaction would not be taken for an income for
David for being Patrick’s father.
However, when David returned the money to Patrick, he added an addition 5% with
the amount payable. This excess payment received by Patrick would be ascertained as an
income and therefore it could be treated as an income gain for Patrick, even though Patrick
did not demand for such income gain. As seen in Hochstrasser v Mayes 1960 AC 376, a gain
has to be made for claiming a receipt pertaining to an income of a person Therefore, it would
be treated a s an income gain as per section 6.5 of ITAA97.
Conclusion
Therefore, the excess amount received by Patrick shall be considered as assessable
income.

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References
Blank v Federal Commissioner of Taxation [2015] FCAFC 154 2015 ATC 20-536
Commissioner of Taxation (Cth) v Whitfords Beach Pty Ltd [1982] HCA 8. (1982) 150 CLR
355; 56 ALJR 240
Countess of Bective v Federal Commissioner of Taxation 1932 47 CLR 417
Hochstrasser v Mayes 1960 AC 376
Scott v Commissioner of Taxation (NSW) 1935 35 SR NSW 215 at 219
The Income Tax Assessment Act 1936
The Income Tax Assessment Act 1997