Taxation Law Assignment - Semester 2, University Name, Tax Law

This document provides a detailed solution to a taxation law assignment, addressing several key areas within the field. The assignment begins with a computation of net capital gains and losses for an individual, Eric, considering the sale of various assets like an antique chair, painting, and shares, and referencing relevant sections of the ITAA 1997. The solution then moves on to calculate fringe benefit tax for Brian, examining the implications of loan interest offsets and applying statutory and actual interest rates. Furthermore, the assignment analyzes the tax implications of rental property co-ownership between Jack and Jill, referring to taxation rulings. The document also explores the concept of tax avoidance, referencing the IRC v Duke of Westminster case and the WT Ramsay v. IRC principle. Finally, the assignment concludes with a discussion of the income tax consequences arising from forestry activities, specifically the sale of timber by Bill, and the application of relevant taxation rulings related to primary production and royalties under the Income Tax Assessment Act 1936 and ITAA 1997. The solution provides thorough calculations, explanations, and references to relevant legislation and rulings.

Running head: TAXATION LAW
Taxation theory, practice and Law
Name of the University
Name of the Student
Authors Note

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................3
Answer to question 3:.................................................................................................................4
Answer to question 4:.................................................................................................................5
Answer to question 5:.................................................................................................................5
Reference List:...........................................................................................................................7

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Answer to question 1:
This particular question is regarding computation of net capital loss or net capital gain
of Eric for a particular year. Section 108-20 of the ITAA 1997 describes the capital gain or
loss determination from obtained from selling of assets. Laws that deal with determination of
net loss and gains involve Section 108-10 of ITAA 1997 and Section 108-20 of the ITAA
1997 (Brigham et al., 2015).
Computation of net capital loss for the year
Particulars
Amount
($)
Loss on sale of Antique Chair 2000
Loss on sale of Painting 8000
Less: Gain on sale of Antique Vase 1000
Total Collectable loss to be carried
forward 9000
Asset Description
Cost
Base
Capital
Proceeds
Capital
gains
Capial
loss
Antique Vase 2000 3000 1000
Antique Chair 3000 1000 2000
Painting 9000 1000 8000
Home Sound System 12000 11000 1000
Shares in listed company 5000 20000 15000
Computation of Net capital gains for the year
Particulars Amount ($)
Gains on sale of shares $15,000
Selling of sound system has incurred a loss of $ 1000 that cannot be regarded for
setting of under section 108-20 of the ITAA 1997. Loss incurred from selling of shares has
resulted in collectible losses that should not be set off against gains attributable from shares
under the same section. The disposal of ordinary shares in current year has resulted in current
profit with no applicable deductions (Mumford, 2017). Therefore, the calculated capital gain

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of Eric is $ 15000. Therefore, loss attributable from collectibles cannot be offset by Eric as
profit has been gained from ordinary assets disposal.
Answer to question 2:
Present scenario deals with the computation of fringe benefit tax that is determined
according to taxation rulings of TR 93/6. The plan of offsetting loan account is often made
by financial organizations according to taxation rulings of TR 93/6 (Howieson et al., 2014).
Such offset is regarded as interest offset agreement. Some interests are incurred by clients for
which structuring of products are required. Profits attributable from such accounts and in
regard to this, clients does not have liability for income tax payment. Brian would not be
liable for income tax payment as per Taxation Rulings of TR 93/6, if refunding interests on
loan is discharged by bank. Therefore, if bank releases Brain from making any interest
payment, then he will not be entitled to make income tax payment.
Taxable value of the loan fringe benefit
In the books of Brian for the year ended 2016/17
Computation under statutory interest rate and actual Interest rate
Statutory
rate
Actual
rate
Particulars Amount ($)
Amount
($)
Amount of Loan 1000000 1000000
FBT Amount 40% business use 400000 400000
Statutory Interest rate @ 5.65% 2825.00 500.00
(Amount of loan x Statutory interest rate) - (Amount
of loan x Actual interest rate) / 12 x 60% business
use
Taxable value of the loan fringe benfit 2325
FBT on end of the loan on payment of interest at the end of loan
Statutory
rate
Actual
rate
Particulars Amount ($)
Amount
($)
Amount of Loan 1000000 1000000
FBT Amount 40% business use 400000 400000

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Statutory Interest rate @ 5.65% 33900.00 6000.00
(Amount of loan x Statutory interest rate) - (Amount
of loan x Actual interest rate) x 60% business use
Taxable value of the loan fringe benfit 27900
Answer to question 3:
Discussion of generated loss or divisionary net income arising from rental property
from co owner asset property is provided in taxation rulings of TR 93/32. Co owners’ taxable
position is evaluated as per the ruling of taxation. This particular situation deals with rental
property taxable position of Jack and Jill. 90% of property is entitled to Jill and rest is entitled
to Jack.
For the purpose of income tax, the rental property co ownership is regarded as one
partnership. However, in the given case, the ownership account for business purpose carrying
value is considered as one partnership and on other hand, for the purpose of satisfying the
income tax computation, such co ownership is regarded as partnership. The distribution of
partnership loss and gains and rental property ownership helps in managing the income loss
gained from rental property. Income tax purpose forms the basis of co ownership of rental
property between Jack and Jill and therefore as per universal law, such co ownership cannot
be considered as partnership.
Under the general law, rental property co ownership is not regarded as partnership
according taxation rulings of TR 92/32. The shared value of loss and income arising from
considered property is not affected by agreement of partnership. Property between Jack and
Jills is hold as joint renters’ rental property co ownership. Therefore, joint equality and
ownership loss should be distributed between Jack and Jill as it is not accountable as
partnership business.

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Answer to question 4:
The occurrence of tax avoidance is quoted as IRC v Duke of Westminster [1936] AC.
One principle has been established in the given case the affairs are allowed to order by each
individual for taxation allowance. Assigning of taxation is lower than this and for seeking tax
avoidance, ruling is not regarded attractive as the structure of law is complex and the
subsequent cases are weakened by this. The WT Ramsay v. IRC principle adopted the citation
of court as an example. Transaction in this case is not for commercial purpose as they have
been arranged artificially. Imposition of tax was the perfect value that is extended for
transactions. If the results are scored for making the success is depicted by principle within
Australia. In such situation, increased amount of tax is not liable to be paid by them and
initiative might be Inland Revenue.
Answer to question 5:
This particular situation deals with contemporary scenario where a large piece of land
is owned by Bill that has several trees of pine. Land was primarily used by bill for the
purpose for grazing sheep’s. A logging company was discovered by Bill that for every 100
meters of timber would pay $ 1000. The consequences of income tax arising from forestry
activities are provided and discussed under taxation ruling related to 95/6. Sale of timber
provides with receipt that that is limited by rulings. Since the tax payer is indulged in forestry
activities, assessing income is involved in this part. The tax payer is involved in carrying out
operations related to forestry according to subsection 6 (1) of the Income Tax Assessment
Act 1936.
The definition of primary production as per the subsection 6 (1), the Income Tax
Assessment Act 1936 is provided as the planting of trees in forest. Therefore according to
subsection 6 (1) of the Income Tax Assessment Act 1936 and evident from case study Bill

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has been engaged into primary production of forest and he is regarded as basic producer. Tax
payers are not concerned about payment of taxes as premium forest operations is tress
plantation. The sales that are made involve partial or complete assets of business.
In order to eradicate unnecessary amount of timber by surrendering the right to
logging by making tax payer a lump sum amount of $ 500000. Then the amount that is
received will be regarded as royalties. The right is granted to tax payer on amount of fell
timber on land in conformity with the section 26 (f) receipts of “royalties”. Trade of forest
operations will not be carried out by Bill under this situation. Plantation of trees by tax payers
has not been for the purpose of gaining profits. Under section 26 (f), such amounts are
received by Bill and they combine the assessable income and royalties. Therefore, it can be
concluded under sub section 6 (1) of the ITAA 1997, income generated from cutting of
timber will be regarded as taxable income.

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Reference List:
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice.
Cengage Learning.
Howieson, B., Hancock, P., Segal, N., Kavanagh, M., Tempone, I., & Kent, J. (2014). Who
should teach what? Australian perceptions of the roles of universities and practice in
the education of professional accountants. Journal of Accounting Education, 32(3),
259-275.
Mumford, A. (2017). Taxing culture: towards a theory of tax collection law. Routledge.