Taxation Law Assessment 3: Letter of Advice and Partnership Analysis

This assignment, completed for ACC304 Taxation Law, presents a comprehensive analysis of tax implications, particularly concerning cryptocurrencies and partnerships. Part A provides a detailed letter of advice addressing the tax treatment of cryptocurrencies, explaining capital gains tax and potential liabilities. It offers guidance on how profits from cryptocurrency trading are taxed either as income or as investments, depending on the portfolio size and the holding period. Part B includes an income statement under accounting standards and tax law, along with a distribution statement for each partner, illustrating the financial aspects. The assignment underscores the importance of understanding tax obligations related to digital assets and provides practical examples to clarify the tax implications of cryptocurrency transactions. References to relevant taxation law resources are also included.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Part A: Letter of Advice.............................................................................................................2
Part B:.........................................................................................................................................4
References:.................................................................................................................................6

2TAXATION LAW
Part A: Letter of Advice
Private & Confidential
Knight Mere Pty Ltd
Mr Alex
45 Marine Drive
Turk Deli NSW 999
Dear Alex
In response to our recent conversation regarding the tax treatment of
“cryptocurrencies”, we request you to kindly read the below stated attached letter of advice.
Scope:
The scope of this letter is to given advice on the tax treatment of “cryptocurrencies”
and the probable effect if the taxpayer has a small portfolio of “cryptocurrencies”.
Summary of Advice:
If you are thinking of purchasing and selling the “cryptocurrencies” then it is time to
start thinking regarding its potential impact which it may have on filing tax return. If you
make a profit from trading in the “cryptocurrencies” then you are required to declare it in
your yearly tax return. Before understand tax consequences of “cryptocurrencies” at first you
must understand that cryptocurrency is referred as digital asset which involves encryption
techniques to regulate the additional units generation.
As ATO have announced that it is particularly targeting the traders of
“cryptocurrencies” it is necessary that you have a better understanding regarding the tax
treatment of your “cryptocurrencies” trading. Accordingly, the profit derived from
“cryptocurrency” is ascertained in AUD amount when you decide to exchange your
cryptocurrency for fiat currency or into goods and service. For instance if you purchase or

3TAXATION LAW
else purchase 1 BTC when it has a worth of $3,000 and then you decide to sell or spend it all
when it has a value of $10,000, then you are most likely to occur a $7,000 tax obligations just
when you decide to sell or spend it. These profits or losses attracts tax liability and based on
the current situation they can be taxed either as income or as investment.
If you have a small portfolio of investment, the profits or loss derived is most likely to
be held as personal investment profit or loss and would attract capital gains tax as an
alternative. A CGT event usually happens when you sell any “cryptocurrency”. If you derive
capital gain when you sell your portfolio of “cryptocurrency”, you will be required to pay
taxes on either on some or all of your gain. For instance, if you purchase “cryptocurrency” as
the investment and later you decide to sell or exchange your “cryptocurrency” into some kind
of digital coins at a high price that results in capital gains, then you will be required to pay the
tax.
We would also like to say that if you are holding a portfolio of “cryptocurrency” for a
year or more prior to selling it or trading it, you might get a 50% CGT discount. Even though
the market value of your “cryptocurrency” changes, you will not make a capital gain or loss
till you actually sell all your holdings.
We hope that the advice given to you relating to tax consequences of your
“cryptocurrency” has helped in understanding your tax position and the probable tax
consequences if you decide to hold “cryptocurrency” in future.
Thank You

4TAXATION LAW
Part B:
Income Statement under accounting standard
Income Statement under Tax Law and Net Income of Partnership

5TAXATION LAW
Distribution Statement of each partner:

6TAXATION LAW
References:
Barkoczy, Stephen. "Foundations of taxation law 2016." OUP Catalogue (2016).
Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).