Analyzing Tax Implications in Different Investment Scenarios

The assignment provides a comprehensive examination of taxation law, bridging theoretical understanding with practical applications. By reviewing relevant literature and case studies, students will explore the intricacies of tax collection laws, focusing on issues such as capital receipts and recurring income in specific contexts. The analysis will highlight differences in legal interpretations and practices, enhancing students' ability to apply theoretical knowledge to real-world challenges in taxation.

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Taxation
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Contents
Calculation of the net gain or loss in the capital for the current year..............................................4
Loan sanctioned by Brain................................................................................................................6
Regarding loan of Jack and Jill........................................................................................................7
Legal Plan........................................................................................................................................8
Land issue of Bill...........................................................................................................................10
References......................................................................................................................................11

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Taxation is the term which denotes to the coercive or compulsory amount of money that is
collected by any levying authority which basically encompasses the governmental authority.
Taxation is the term which is applicable to all kinds of involuntary levies right from income to
the gains in capital which further leads to the estate taxes. Taxation is very different in approach
as compared to the other forms of payments like the market exchange and different other
services. The governmental organizations are accountable regarding the collection of taxation
through various implicit and explicit ways or threat of action (Aust, 2013). The taxation varies
from the extortion and protection racket as the organization on which taxation is implemented is
a governmental and not private agency. The system of tax varies with the variation on places and
countries which basically denotes to the variations in location. Taxation is found to be imposed
basically on the physical and tangible assets such as the events, transactions of sales and
properties. The devising of tax is one of the most important aspect and issues in the political
arena.
Taxation can be further regarded as the principle on the basis of which the government raises the
revenue. The government of any country will not be able to implement the laws in the states in a
proper which would lead to many issues is the import and export of various products in the
country without the imposition of taxation. Therefore, taxation has a very crucial role in the
delivery of the public goods or products to different communities. There are many ways in which
the government of any country can happen to raise the revenue such as: charging of fees can be
devised by the governmental organizations for rendering services. The governmental
organization can also implement the granting of the license regarding imposing amounts as fines
in the case of breach of various laws and design new rules and laws regarding different
investments and assets (Beatty, 2015). Taxation can be very well differentiated from different
other forms of payments as it does not need any kind of consent and is not associated with any
rendered services. Systems of taxation have varied in a considerable manner across time and
jurisdiction.
Taxes can be further stated as the special systems which are imposed on various communities.
The laws of taxation are denoted as the frameworks of laws which assist in governing the
liabilities of the individuals and the organization for paying the tax. Taxes encompass all the
rules and regulations along with the establishment of the base of the tax and the implementation

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of the taxes. It is observed as the Australia comprises of a vast structure of laws of taxation. The
key source of Australia is based on regarding finding hundreds of pages consisting the
legislation of taxes which are enacted by the territory parliaments , commonwealth and the
federal state (Brigham, 2014).
Calculation of the net gain or loss in the capital for the current year
Issue
The laws of taxation are implemented and regulated by the commonwealth constitution along
with the international treaties which encompass the Double Tax Agreements to associate with the
foreign countries. Taxation is very important and useful regarding various challenges and studies
associated with the society due to the vast and expanded nature along with the complexities in
technologies (Brigham & Ehrhardt, 2013). Right from the last years, it was observed that many
steps and attempts were taken by Eric who involved many attempts for the solicitation of some
of the assets. In accordance to the question, the assumption had been made that he had those
specific assets since one year. The capital’s taxability is found to increase when there is an
increase in the selling price of the specific assets right from the base cost. The cost of indexation
will not valid in the case of Eric as he had not made any reservations of the assets for more
duration of time than just a year.
Rule
1) Assets are the material and tangible things that are brought by the customers for their
personal use and pleasures. This personal usage does not encompass the collectibles. These
tangible assets are sold again to a different individual and the taxability does not play into the
case in which the costs of acquisition of the considered assets are found to be less than $10000.
The item that was acquired by Eric initially is the sound system for his home which was
supposed to have the cost of acquisition as $ 12000. The asset which was bought by Eric
secondly is the share of a company which had the cost of acquisition to be less than the previous
one which is $15000 (Dafflon, 2015).
2) Assets which were brought by Eric for personal pleasures and enjoyment do not involve
the taxability of the gain in the capital as the costs of procurement of the assets is very much less

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than or equivalent to $500. On the basis of this information, Eric had taken over the collectibles.
The asset which was taken over by Eric at first is the painting which has cost of acquisition as
$90000 (Filatova, 2014). The asset that was secondly captured by Eric is the antique chair which
has cost of acquisition as $30000. The last asset which was acquired by Eric is the antique vase.
It had acquisition costs of $2000 correspondingly.
Application
On the basis of the entire discussion, the following table has been formulated which are used
in the calculation of the corresponding assets.
Estimation of Capital
Particulars Cost Base of Assets Capital Proceeds of
Assets
Net Capital Gain/
(Net Capital Loss)
Antique Vases 2,000 3000 1000 Gain
Antique Chairs 3,000 1000 (2000) Loss
Painting of the assert 9,000 1000 (8000) Loss
Shares that are listed
in the company
5,000 20000 15000 Gain
Sound system ofr
home
12,000 11000 (1000) Loss
Net Capital Gain/Loss 5000 n
Conclusion
Assets that are taken over or acquired for a time period that is more than a year for any kind of
personal use or pleasure, taxation of the capital is valid and applicable in such cases. Taxability

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is valid and applicable on the collectibles which are acquired with the costs more than $500. The
losses in the capital for the entire year have been fixed with the required net worth of loss or
gain.
Loan sanctioned by Brain
Issue
Brian has recommended a new and innovative system to the employees in which he was offering
loan for time duration of three years with the rate of interest being one percent on a monthly
basis. Because of this idea which involves $ 1 million, many individuals turned up to open a
bank account and receive the benefits and advantages of the loans which were offered to the
employees by Brian (Francks & Francks, 2015). He was making the offer of the rate of interest
that was less than the rate of interest that was offered in the market.
Rule
Apart from this offer, in order to calculate the taxability of such kinds of benefits, the rate of the
statutory interest need to be considered. In accordance to the question, the interest rate of
statutory will be accounted as 5.56 percent as the loan was made to be offered on the date of 1st
April, 2016.
Application
In the first step, the benefits of the loan will be computed after the eradication of the rule. The
loan interests are determined on the basis of the actual interest rate that should be deducted from
the loan which is determined due to the statutory rate of interest. The rate of interest which are
based on the statutory interest = $ 1000000 * 5.65 percent = $ 56,500. The interest which are
based in the actual interest = $ 1000000 * 1 percent= $10000. The taxation is varying in both the
scenarios, which is $ 56, 500 - $ 10,000 = $ 46,500. In the second step, Brian needs to follow the
next step. He must compute the rate of statutory interest after the acceptance of the amount to be
payable and real. The interest rate is $1000000 * 5.65 percent = $56,500. In the third step, from
the whole percent, only 40 percent was utilized in the implementation of the meeting for the
upcoming events, where Brian has calculated the costs from which tax was deducted manually

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which is $ 56,500 * 40 percent = $ 22, 600. According to the fourth step, from the entire amount
of the loan, 40 percent was utilized in the meeting for the near future by Brian which involves
the real amount that amounts to as $10000 * 40 percent = $4,000. In the fourth step, apart from
the above mentioned steps, the actual amount is then computed in this step from the manual
amount so as to arrive at the desired conclusion. Hence, $22,600 - $4,000 = $ 18,600. The final
amount, in the final step, needs to be calculated by subtracting the amount from the first step
after calculating the amount till 5th step. Hence, $46,500 - $ 18,600 = $ 27,900.
Conclusion
However, if there happens to be any kind of system if repayment of such loans right before the
period of termination, in that case, instead of the conventional system of repayment, the period
deemed of the loan will be considered from starting period of the interest or become payable
(Leigh & Blakely, 2016). Other than this, the obligation is on the section of the repaying mode
of the interests, then in these kinds of scenarios, the calculation need to be conducted in a very
similar way such as the actual rate of interest that is considered as 0.
Regarding loan of Jack and Jill
Issue
Both Jack and Jill have made an agreement for borrowing the money for the house which they
have rented. In the agreement it has been structured that Jack was allotted to receive ten percent
of the profits, on the other hand, Jill was eligible to receive ninety percent of the profit deriving
out of the whole property.
Rule
In accordance to the agreement made on between Jack and Jill, in any scenario which would
involve any kind of loss in the property, the entire amount of loss, that is 100 percent, will be
handled by Jack. Jack and Jill, in previous year, had sustained a loss of around $1000 that was
completely paid by Jack with no obligation of any of the losses on Jill who is Jack’s wife (Meese
& Oman, 2013). The loss resulted in a set off on the other different forms of incomes of Jack
that would determine the net loss or profit for the whole year. Jack, apart from this specific

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option, has one more choice which is regarding carrying the whole loss in the forward direction
for the upcoming year.
Application
In any scenario where Jack is confronting any kind of loss, and then he has the complete right to
bear the complete amount and can take the amount forward in the future years so as to maintain
the net loss in the amount or the net income. In the second scenario, is there is any amount of
gain, and then the particular amount will be categorized between Jack and his wife Jill
effectively in the ratio of 10:90. In such cases, Jack has the complete right for setting off the total
loss of $1000 which resulted after the sale of the property.
Conclusion
Hence, from the whole discussion, it was decided that Jack was able to handle the losses which
had occurred in the last year and he is obtaining the amount in the current year after the sale of
the property (Mumford, 2017). The conclusion was made which stated that if Jack happens to not
have any gain in the recent year, he, in such case, has to be accountable to pay for the entire loss
with no involvement of his wife Jill. Hence, this process has been a great assistance to Jill for
staying away from the effects of taxation where as Jack is only accountable to bear the entire
loss.
Legal Plan
Issue
In accordance to the law, every person has the power regarding the legal strategies and plans
which assist them in decreasing the net amount of income at the end of each year, according to
the case scenario study of the IRC versus Duke of Westminster [1936] AC 1 (Seyoum, 2013).
After getting into the details of the case after analyzing the case properly, it was clarified that
each individual obtains the right of utilizing the benefits and rights which are attached to the
overall income.
Rule

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In the terms which are familiar, the rights which are valid only in the scenarios where they are
used in a very fair manner and the appropriate methods which are applied to it , that is
supposed for the reduction of the income costs and the values to a tax at the end of that
particular year (Valente, 2017).
The following principles are categorized from the above scenario of the case study:
Principles 1:
The entire authority has been awarded to the individual for using the strategic plans and methods
for the reduction of the total income by regulating their own individual accounts.
Principles 2:
There will be no extra taxes levies or implemented if the process will be carried out in an
appropriate manner without any methods or means that are illegal.
Principles 3:
When an individual follows the legal and fair way for reduction of the rate of tax and amount,
then they will not be enforced for paying the extra rate of tax in the near future.
Application
The point number can be stated as valid unless any new kind of law is executed in the nation.
The ideology is very different from each other and keeps varying from the previous year. The
key objective of these rules has a prominent role and importance in the present circumstance in
different manners (Vatn, 2015). Considering an instance, in the scenario in which a business is
confronted with great deal of losses in a specific year that attends to its obligations, in such
conditions, the business has the chance for the alterations in the amount and balance sheets. The
business can make preparations regarding the new one with the assets that are fixed and the value
of the assets. In certain cases, the business did not happen to provide the documents that are
relevant but however, they can carry out the implementation further.
Conclusion

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However, specific restrictions are appropriate for them (Verdier & Voeten, 2014). They must not
follow any kind of illegal ways for achieving so. Summarizing the entire discussion, it is clearly
evident that the business organization has to function in a very transparent and legal manner for
achieving the business target and need to follow the rules and laws along with its procedures.
Land issue of Bill
Issue
In this case, Bill acquired a piece of land that he has considered for using it for the purpose of
grazing by the sheep. So as to fulfill his wishes, the whole land requires to be cleared as much
number of trees was planted over there. Hence, he had hired a company that provides logging
services for clearing the entire land (Wagner, 2013).
Rule
The logging company has charged Bill with $ 1000 for every 100 meters of the timber. However,
the key question that arises in this case is that whether the tax is applicable on the company
providing logging services for the whole amount. In accordance to the given situation, there are
no presences of any fact on the receipts which are received from the logging company that is
considered as the object of revenue or might not be assumed to be an object. The highest degree
of uncertainty states that the rules that are associated to the gains in the capital are not suitable
and applicable in the recent circumstances of Bill (Yan & Luo, 2016).
Application
When the Bill is making an investment of the entire amount of $50000 to the company providing
logging services for the removal of the trees for getting the timbers, the equal and entire amount
is transferred to the hands of Bill in the form of the receipt of capital. This happens because of
the reason in which the entire amount is considered as a lump sum and there is more recurring
receipt for the reason. Again, the transaction which has occurred facilitates the provision of the
right to the specific authority for the removal of the trees from the particular land. Hence, after
the complete scenario, the case was assumed to be as the receipt of lump sum along with the net
capital receipt. Hence, taxation of the capital is in the responsibility of Bill.

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Conclusion
Therefore, in the above scenarios, the value of, money that was put into investment has played a
great role and has a key significance in the laws of taxation. These two cases are very much
different from each other. In the first case scenario, the receipt is in the accountability of Bill and
is recurring. On the other hand, the receipt is in the accountability of Bill, however, it is not
recurring which provides the right of receiving the payments from the logging of the tress in the
upcoming situations. He will receive the same receipt in a bigger investment and that will be
taken into consideration as the receipt in one- time (Verdier & Voeten, 2014). These are the
considerations as the receipt in the kind of one-time as when they are made to be removed from
the land, it will consume more time for growing the trees again on the same section of land.
Thus, in the next upcoming situation, Bill is getting sufficient amount of money from the other
side. This act is regarded as a lump sum by making the assets getting sold. When one of the
parties sells the product to the opposition party, then the same receipt has to be considered along
with the taxation. When the observation was made regarding the first case, it did not attract any
gain in the tax, and then it needs to be treated as a normal and conventional gain and no gain in
capital.
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