Holmes Institute HI6028 Taxation Law Individual Assignment Analysis

This assignment solution addresses several taxation law scenarios. Part 1 analyzes the CGT consequences of selling a painting, considering its classification as a collectible and applying relevant sections of the ITAA 97. Parts 2, 3, and 4 similarly examine CGT implications for the sale of a historical sculpture, antique jewelry, and a picture, respectively, including calculations of cost base, cost proceeds, and potential gains or losses. The solution then shifts to income tax, evaluating whether income from writing a book is considered income from personal exertion, referencing relevant case law such as Whitaker v Commissioner of Taxation. Finally, the assignment addresses the tax implications of a loan repayment, determining whether additional payments constitute assessable income, referencing cases like Scott v Commissioner of Taxation.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Author Note

1TAXATION LAW
1
Part 1
The first part of the situation involves the CGT consequence of the sale of painting by Helen.
As provided under section 108. 10 of the ITAA 97, an antique painting will be admitted as a
CGT assets under the category of collectibles and any transaction related to the same as a
CGT event. A CGT gain or loss incurred under section 102.2 of the ITAA 97 always needs to
be accompanied by a CGT event under section 104.5 of the ITAA 97. An A1 category of
CGT event will be attracted in case a CGT asset has been disposed off by means of sale as
provided under the section 104.10 of the ITAA 97. The timing of the acquisition of a CGT
asset needs to be assessed with respect to the time of conferring of ownership upon the
taxpayer under section 109.5 of the ITAA 97.
It has not been expressly provided in the given situation as to when exactly the painting has
been purchased or acquired by Helen. Any CGT asset that has been purchased after the date
of 20 September 1985 will be permitted to be computed as a CGT asset. In this particular
instance the painting depicts a collectible and needs to be computed accordingly. The cost
base in this case will be the first element that is the purchase price of $4,000 under section
110.25 of the ITAA 97. The painting has been conferred upon Helen by either succession or
gift as the same has been initially purchased by her father. The cost proceed will be $12,000.
Hence the CGT gain will be computed by finding the difference between CP and CB. Being
held for more than 1 year 50% discount will be allowed.
Part 2
The second part of the situation involves the CGT consequence of the sale of historical
sculpture by Helen.

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As provided under section 108. 10 of the ITAA 97, an historical sculpture will be admitted as
a CGT assets under the category of collectibles and any transaction related to the same as a
CGT event. A CGT gain or loss incurred under section 102.2 of the ITAA 97 always needs to
be accompanied by a CGT event under section 104.5 of the ITAA 97. An A1 category of
CGT event will be attracted in case a CGT asset has been disposed off by means of sale as
provided under the section 104.10 of the ITAA 97. The timing of the acquisition of a CGT
asset needs to be assessed with respect to the time of conferring of ownership upon the
taxpayer under section 109.5 of the ITAA 97.
The time of acquisition of the sculpture by Helen has been provided in the instance to be on
December 1993. Any CGT asset that has been purchased after the date of 20 September 1985
will be permitted to be computed as a CGT asset. In this particular instance the sculpture
depicts a collectible and needs to be computed accordingly. The cost base in this case will be
the first element that is the purchase price of $5500 under section 110.25 of the ITAA 97.
The cost proceed will be $5000. Hence the CGT gain will be computed by finding the
difference between CP and CB. Being held for more than 1 year 50% discount will be
allowed. Therefore the CGT gain will be $500.
Part 3
The third part of the situation involves the CGT consequence of the sale of antique jewellery
by Helen.
As provided under section 108. 10 of the ITAA 97, an antique jewellery will be admitted as a
CGT assets under the category of collectibles and any transaction related to the same as a
CGT event. A CGT gain or loss incurred under section 102.2 of the ITAA 97 always needs to
be accompanied by a CGT event under section 104.5 of the ITAA 97. An A1 category of
CGT event will be attracted in case a CGT asset has been disposed off by means of sale as

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provided under the section 104.10 of the ITAA 97. The timing of the acquisition of a CGT
asset needs to be assessed with respect to the time of conferring of ownership upon the
taxpayer under section 109.5 of the ITAA 97.
The time of acquisition of the jewellery by Helen has been provided in the instance to be on
October 1987. Any CGT asset that has been purchased after the date of 20 September 1985
will be permitted to be computed as a CGT asset. In this particular instance the jewellery
depicts a collectible and needs to be computed accordingly. The cost base in this case will be
the first element that is the purchase price of $14000 under section 110.25 of the ITAA 97.
The cost proceed will be $13000. Hence the CGT gain or loss will be computed by finding
the difference between CP and CB. Being held for more than 1 year 50% discount will be
allowed. Therefore the CGT loss will be $1000.
Part 4
The fourth part of the situation involves the CGT consequence of the sale of picture by
Helen.
As provided under section 108. 10 of the ITAA 97, an picture will be admitted as a CGT
assets under the category of collectibles and any transaction related to the same as a CGT
event. A CGT gain or loss incurred under section 102.2 of the ITAA 97 always needs to be
accompanied by a CGT event under section 104.5 of the ITAA 97. An A1 category of CGT
event will be attracted in case a CGT asset has been disposed off by means of sale as
provided under the section 104.10 of the ITAA 97. The timing of the acquisition of a CGT
asset needs to be assessed with respect to the time of conferring of ownership upon the
taxpayer under section 109.5 of the ITAA 97.
It has not been expressly provided in the given situation as to when exactly the picture has
been purchased or acquired by Helen. Any CGT asset that has been purchased after the date

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of 20 September 1985 will be permitted to be computed as a CGT asset. In this particular
instance the picture depicts a collectible and needs to be computed accordingly. The cost base
in this case will be the first element that is the purchase price of $470 under section 110.25 of
the ITAA 97. The painting has been conferred upon Helen by either succession or gift as the
same has been initially purchased by her mother. The cost proceed will be $5000. Hence the
CGT gain will be computed by finding the difference between CP and CB. Being held for
more than 1 year 50% discount will be allowed.
2
The first issue in this instance is whether the income earned by Barbara by writing the book
can be taxed as income through personal exertion. Whether the same implication will be
attracted if the book has been written by Barbara in his spare time.
Under section 6.1 of the ITAA 97, if an income is obtained by personal effort will be treated
as an income to personal exertion and subjected to the taxation accordingly. This needs to be
discussed under the principles established in the case of Whitaker v Commissioner of
Taxation [1998] FCA 262.
The amount of $13,000 received by Barbara for writing the book as offered by Eco Books
Ltd will be treated as an income through personal exertion.
As rendered in the case of Californian Copper Syndicate v Harris (Surveyor of Taxes) (1904)
5 TC 159, right is to be treated as a Capital asset and requires to be subjected to CGT. Hence
the 13400 dollars received for the selling of copyright by Barbara will be subjected to capital
gain tax.
The receipt of $3,200 for the sale of manuscripts of interview as well as $4340 for the sale of
manuscripts of the book will be subjected to taxation under income from personal exertion as
made evident with the case of Federal Wharf Co Ltd v. DFC of T (1930) 44 CLR 24.

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In an alternative situation, if the book has been written as a hobby by Barbara and later on she
decided to sell it, it would have not been admitted to taxation as under Tax Ruling 97/11
income from hobby is not taxable.
3
Whether money advanced by Patrick as a loan would be treated as assessable when repaid by
David with an additional 5% in the absence of any agreement for interest.
It has been held in the case of Scott v Commissioner of Taxation (NSW) (1935), any amount
of money which the taxpayer receives will only be considered as an assessable income, if the
same has added as an additional value towards the assessable income of the taxpayer.
All the incomes that is derived through ordinary concepts will be treated as an ordinary
income under section 6.5 of the ITAA 97.
It has been made evident with the case of Allied Mills Industries Pty Ltd v FCT (1989) 20
ATR 457, a receipt will only be allowed as an assessable income if the same complies with
all the essentials of assessable income as well as pertains a gain towards the assessable
income of the taxpayer.
In the present case the loan has been provided by Patrick towards David. The amount of loan
extended was $52,000. Although they did not agree upon any interest to be made payable,
they made an agreement to repay an amount of $58,000. This implies and additional $6,000
repaid after 5 years as a reward towards Patrick for extending the loan. This can be treated as
a gain made by Patrick from the transaction.
Again, at the end of 5 years 5% of an amount has been repaid by David towards Patrick as a
gesture towards the extension of the loan. This needs to be treated as a gain that has been
caused to Patrick, which affect his taxable income and as a benefit towards the same.

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Hence the additional 5% will be taxable in the hands of Patrick.

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Reference
Allied Mills Industries Pty Ltd v FCT (1989) 20 ATR 457
Californian Copper Syndicate v Harris (Surveyor of Taxes) (1904) 5 TC 159
Federal Wharf Co Ltd v. DFC of T (1930) 44 CLR 24
Scott v Commissioner of Taxation (NSW) (1935)
Tax Ruling 97/11
The Income Tax Assessment Act 1936
The Income Tax Assessment Act 1997
Whitaker v Commissioner of Taxation [1998] FCA 262