Taxation Theory, Practice & Law: Capital Gains and FBT Analysis

This assignment addresses key concepts in taxation, focusing on capital gains and fringe benefits tax (FBT). It begins by determining the net capital gain of a client, analyzing various assets like vacant land, an antique bed, a painting, shares, and a violin. The calculations consider purchase prices, selling prices, and additional expenses, applying relevant tax models like the discount and indexation models. The second part of the assignment advises on analyzing FBT for an employee named Jasmine, considering car usage, and calculating the taxable value of fringe benefits. It details the steps for FBT calculation, including statutory formula and operating cost methods, along with a discussion of the pros and cons of offering fringe benefits. The assignment also analyzes the tax consequences of a loan used by Jasmine for purchasing securities, providing a comprehensive overview of taxation principles and their practical application.

Taxation Theory,
Practice & law

Table of contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Determining the net capital gain of client..............................................................................1
Question 2........................................................................................................................................2
Advising jasmine in analysing FBT on various assets...........................................................2
Analysing the tax consequences as per loan amount will be used by jasmine in purchasing
securities.................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Taxation theories and laws were developed by the government, includes lots of taxes
which should be practice in the organization. The assignment is based on taxation theory and
practice law. Various taxes which are payable and not payable by the employees in organization
are consisted by the taxation theories. Tax in country were introduced to defend the nation and to
maintain the institution of good government for the benefit to public. The net capital gain and
capital loss according to the information provided in the scenario will be presented in this
assignment. The study of this report will give the information about the fringe benefits tax with
the steps to solve. The study has evaluated the fringe benefit tax liability in tax credit relation.
Further, assignment will provide the non-fringe benefit amount for the provided information.
QUESTION 1
Determining the net capital gain of client.
The amount of profit ascertain from sale of different assets like stock, real state, bond is
called capital gain. The amount is said to be capital gain when selling price of capital gain
exceeds its purchase price. The capital gain is identified when the selling price is more than the
cost price of the particular goods. . This profit is counted as an income of the payee and
therefore, tax is charged for the year at which transfer of the capital \takes place . The capital
loss is just opposite to it. It arises when the selling price of the asset is lower than its purchase
price. Capital gains are of two types realized capital gain i.e. this investment which is sold for
the profit which is obtain from the investment and another one is unrealized capital gain, which
is not sold yet, but can earn profit when they are sold.
The information and the calculation of capital gain with its interpretation has been
discussed.
Block of vacant land
The contract has been done to sell the block of vacant land for $320000 in 3 June of
current. The client has taken this land on January 2001 for $100,000 and done $20000 extra
expenses on waste rates land taxes etc. at the time of her ownership. According to the contract of
sale, client has got amount $20000 at time of signing agreement and remaining amount is to be
given on 3rd January of the next tax year. The capital gain for its sale of land was calculated
under in the table.
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Interpretation:
The calculation of capital gain is done above in the table. In this the evaluation of cost
based index has been done by taking purchase price and additional charges occurred at the time
of sale into consideration. The purchase price of the land was $100000 in 2001 and at the time of
selling has incurred additional charges for $20000. So, the cost base unindexed was $120000.
after selling she get the amount of $320000 and from that the cost base index has been deducted
to obtain the gross capital gain. As per the section 54b, the asset which are inherited after 11:45
am on 21st September, 1999, the discount model apply. In this the exemption is given only in half
of the amount of capital which is $100,000.
Antique bed
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The bed has been purchased by client for $3500 on 21st July, with its insurance. In
present year, market value of bed is $25000, which was stolen from her house. She has now
claimed for insurance and for that, she has received $11000. calculation of capital gain is done in
the table
Interpretation
The calculation of capital gain is done by taking purchase price and additional charges of
insurance claim into consideration. In first step, calculation of cost based index is done for 12
November. The purchase price of bed was $10,157.22 and after adding additional expenses of
$4011.88, by including indexation rates the total cost based index incurred is 14169.09 in current
year on 21st January, the insurance claim was received for $11000. The gross capital gain was
$11000. As per the section, the property purchased before 11:45 am on 21st September 1999 the
indexation model will be applicable.
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Paintin
In this scenario, the painting from famous artist has been purchased by client for $2000
on 2nd May, 1985. The price of the painting has taken rise from sudden demise of artist. The
client decided to sell painting in an auction for $125,000 on April 3rd of present year.
Calculation of capital gain obtained from sale of painting is calculated under-
Interpretation:
In this case, as per the calculation is done, it is feasibly identified that on May 1985,
when she purchased the painting the price of that painting was $2000 including indexation model
rate, amounts $5941.95. When she decided to sale it in April 2018, the painting amounted to her
$125,000. She has received the capital gain of $ 119058.05. As per the section the property
purchase before 11:45 am on 21st September 1999 the indexation model will be applicable.
Shares
The scenario depicts substantial share portfolio received by clients many years ago. The
calculation of capital gain of client received from issue of share has been calculated under.
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Interpretation
1. In first case, 2011, the purchase price of share was $15 per share, number of
commonwealth share were $1000 and $750 was charges applicable on stamp duty. The
total cost incurred was $15750. On july 18 when client decided to sell her share than
selling price of share was $47 with the quantity of 1000 share, incurred brokerage amount
has been deducted which was $ 550. net sales volume was $46450. capital gain received
by client was $30700.
2. In second case, 2011, the purchase price of share was $12 per share, number of phb iron
ore Ltd shares were 2500 and $15000 was charges applicable on stamp duty. The total
cost incurred was $31500. On july 18 when client decided to sell her share than selling
price of share was $25 with the number of 2500 share, incurred brokerage amount has
been deducted which was $ 1000. Net sales volume was $61500. capital gain received by
client was $30000.
3. In first case, 2011, the purchase price of share was $5 per share, number of share of
young kids learning limited were $1200 and $500 was charges applicable on stamp duty.
The total cost incurred was $6500. On July 18 when client decided to sell her share than
selling price of share was $0.5 with the quantity of 1200 share, incurred brokerage
amount has been deducted which was $1000. net sales volume was $-400. capital loss
received by client was $6900.
4. In first case, 2011, the purchase price of share was $1 per share, number of shares of
build limited were $10000 and $1100 was charges applicable on stamp duty. The total
cost incurred was $11100. On july 18, when client decided to sell her share than selling
price of share was $2.5 with the quantity of 10000 share, incurred brokerage amount has
been deducted which was $ 900. net sales volume was $24100. capital gain received by
client was $53800.
Therefore adjusting the values of capital gain of the share of all the case, the overall capital
gain was $39900.
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Violin
In this case the client is fond of playing violin. She has acquired her violin on 1st
June 1999 for $5500. on may 21st she sold her violin for $12000. the evaluation of capital gain
obtained from violin is being done under.
Interpretation
In above calculation the cost price of violin in june 1999 was $5500 and she decided to
sell it and got the $12000. By excluding the gst benefit she received the capital gain of $2906.3.