HI6028 Taxation Law: Analysis of Taxation Law Questions

This assignment solution addresses several taxation law questions. It analyzes the capital gains tax (CGT) implications of selling collectibles like antique paintings, historical sculptures, and antique jewellery, referencing sections of the ITAA1997. The solution also examines whether amounts received for writing a book and selling manuscripts constitute income from personal exertion, considering the hobby aspect. Finally, it discusses whether loan repayments should be considered taxable income. The document provides detailed explanations and references relevant case law to support its analysis. Desklib is a platform where students can find similar solved assignments and past papers for academic assistance.

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

1TAXATION
Answer 1
a)
The issue that is evident from the present case is the capital gain tax implication of the
transaction involving the sale of antique painting by Helen.
The transaction with respect to the antique painting involved in this case will be assessed
under taxation as a collectible which implies a CGT asset under section 108-10 of the
ITAA1997. Any CGT implication whether a loss or a gain under section 102-10 of the
ITAA1997 needs to bundle up with a CGT event as enumerated under section 104-5 of the
ITAA1997. As per the several categories of CGT events enumerated under section 104-10 of
the ITAA1997 the sale of an asset with an objective to effect its disposal will be treated as in
A1 category of CGT events. The question that arises as to the timing of the acquisition of a
CGT asset lies in the conferring of the ownership of this asset upon the taxpayer as concluded
in section 109-5 of the ITAA1997.
In the instant scenario the time at which the acquisition has been effected in relation to the
painting by Helen has not been provided clearly. The ambiguity regarding the time of
acquisition has arisen because of the fact that the painting has actually been acquired by
Helen’s father. The painting will only be rendered as a CGT asset if it has been acquired on a
date succeeding 20-09-1985. Any asset of capital nature will not be included in the
computation of CGT, if the same has been acquired on a date prior to the prescribed one. As
it is evident from the given situation that the painting has been compliant with all the date
requirements it will be treated under the CGT implications as a collectible. In such case the
net capital gain or loss will be computed by finding the difference between the cost proceed
and the cost base. The cost base of the painting will imply the first element of the cost base
that is the acquisition price amounting to $4,000. The time of the acquisition being not

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evident as the painting has been purchased by her father and been conferred by the either
through succession or gift the acquisition price needs to be adjusted in accordance with the
market value existing at that time. The capital proceed however has amounted to 12000
dollars and being held asset for more than 1 year of 50% discount will be allowed on the total
CGT availability.
b)
The issue that is evident from the present case is the capital gain tax implication of the
transaction involving the sale of historical sculpture by Helen.
The transaction with respect to the historical sculpture involved in this case will be assessed
under taxation as a collectible, which implies a CGT asset under section 108-10 of the
ITAA1997. Any CGT implication whether a loss or a gain under section 102-10 of the
ITAA1997 needs to bundle up with a CGT event as enumerated under section 104-5 of the
ITAA1997. As per the several categories of CGT events enumerated under section 104-10 of
the ITAA1997 the sale of an asset with an objective to effect its disposal will be treated as in
A1 category of CGT events. The question that arises as to the timing of the acquisition of a
CGT asset lies in the conferring of the ownership of this asset upon the taxpayer as concluded
in section 109-5 of the ITAA1997.
In the instant scenario the sculpture has been acquired by Helen on December 1993. The
sculpture will only be rendered as a CGT asset if it has been acquired on a date succeeding
20-09-1985. Any asset of capital nature will not be included in the computation of CGT, if
the same has been acquired on a date prior to the prescribed one. As it is evident from the
given situation that the sculpture has been compliant with all the date requirements it will be
treated under the CGT implications as a collectible. In such case the net capital gain or loss
will be computed by finding the difference between the cost proceed and the cost base. The

3TAXATION
cost base of the sculpture will imply the first element of the cost base that is the acquisition
price amounting to $5500. The capital proceed however has amounted to 6000 dollars and
being held asset for more than 1 year of 50% discount will be allowed on the total CGT
availability. There has been a CGT gain of $500.
c)
The issue that is evident from the present case is the capital gain tax implication of the
transaction involving the sale of antique jewellery by Helen.
The transaction with respect to the antique jewellery involved in this case will be assessed
under taxation as a collectible, which implies a CGT asset under section 108-10 of the
ITAA1997. Any CGT implication whether a loss or a gain under section 102-10 of the
ITAA1997 needs to bundle up with a CGT event as enumerated under section 104-5 of the
ITAA1997. As per the several categories of CGT events enumerated under section 104-10 of
the ITAA1997 the sale of an asset with an objective to effect its disposal will be treated as in
A1 category of CGT events. The question that arises as to the timing of the acquisition of a
CGT asset lies in the conferring of the ownership of this asset upon the taxpayer as concluded
in section 109-5 of the ITAA1997.
In the instant scenario the jewellery has been acquired by Helen on December 1993. The
jewellery will only be rendered as a CGT asset if it has been acquired on a date succeeding
20-09-1985. Any asset of capital nature will not be included in the computation of CGT, if
the same has been acquired on a date prior to the prescribed one. As it is evident from the
given situation that the jewellery has been compliant with all the date requirements it will be
treated under the CGT implications as a collectible. In such case the net capital gain or loss
will be computed by finding the difference between the cost proceed and the cost base. The
cost base of the jewellery will imply the first element of the cost base that is the acquisition

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price amounting to $14000. The capital proceed however has amounted to 13000 dollars and
being held asset for more than 1 year of 50% discount will be allowed on the total CGT
availability. There has been a CGT loss of $1000.
d)
The issue that is evident from the present case is the capital gain tax implication of the
transaction involving the sale of picture by Helen.
The transaction with respect to the picture involved in this case will be assessed under
taxation as a collectible which implies a CGT asset under section 108-10 of the ITAA1997.
Any CGT implication whether a loss or a gain under section 102-10 of the ITAA1997 needs
to bundle up with a CGT event as enumerated under section 104-5 of the ITAA1997. As per
the several categories of CGT events enumerated under section 104-10 of the ITAA1997 the
sale of an asset with an objective to effect its disposal will be treated as in A1 category of
CGT events. The question that arises as to the timing of the acquisition of a CGT asset lies in
the conferring of the ownership of this asset upon the taxpayer as concluded in section 109-5
of the ITAA1997.
In the instant scenario the time at which the acquisition has been effected in relation to the
picture by Helen has not been provided clearly. The ambiguity regarding the time of
acquisition has arisen because of the fact that the picture has actually been acquired by
Helen’s mother. The picture will only be rendered as a CGT asset if it has been acquired on a
date succeeding 20-09-1985. Any asset of capital nature will not be included in the
computation of CGT, if the same has been acquired on a date prior to the prescribed one. As
it is evident from the given situation that the picture has been compliant with all the date
requirements it will be treated under the CGT implications as a collectible. In such case the
net capital gain or loss will be computed by finding the difference between the cost proceed

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and the cost base. The cost base of the picture will imply the first element of the cost base
that is the acquisition price amounting to $470. The time of the acquisition being not evident
as the painting has been purchased by her mother and been conferred by the either through
succession or gift the acquisition price needs to be adjusted in accordance with the market
value existing at that time. The capital proceed however has amounted to 5000 dollars and
being held asset for more than 1 year of 50% discount will be allowed on the total CGT
availability.
Answer 2
Situation 1
The concern that the facts of the case presents is whether the amount received by Barbara for
writing the book as per the offer by Eco Books Ltd can be assessed as income from personal
exertion earned by Barbara.
An income under section 6-1 of the ITAA1936 depicts an income derived from personal
exertion. It has been held in the case of Hayes v Federal Commissioner of Taxation [1956]
HCA 21, when a person exerts his efforts in an attempt to earn income, the income does
obtained from the same will be treated as income from personal exertion.
The principles laid down in the case of FC of T v Whitfords Beach Pty Ltd 82 ATC 4031
suggests that the amount of money that Barbara has received for writing the book as offered
as well as paid by Eco Books Ltd totalling up to $13,000 will be required to be treated as an
income derived through personal exertion.
The principles laid down in the case of Brent v FC of T 1971 ATC 4195 suggests that the
amount of money that Barbara has received for giving up the copyright of the book to the Eco
Books Ltd totalling up to 13400 dollars will be required to be treated as a capital gain as
copyright construes to be a Capital asset.

6TAXATION
The amount of money received by Barbara for the sale of the manuscripts with respect to the
book as well as with respect to the interviews to the library for an amount of 4350 dollars and
$3200 will be assessed as an income from personal exertion. This can be supported with the
case of FC of T v Whitfords Beach Pty Ltd 82 ATC 4031.
Situation 2
The concern that the facts of the case presents is whether the amount received by Barbara for
selling to Eco Books Ltd can be assessed as income from personal exertion earned by
Barbara if the book has been written by Barbara on his spare time and decided to be sold
afterwards.
The tax ruling 9711 makes it evident that any income that is derived from the pursuance of a
hobby will not be treated as a taxable income. In this situation as the book has been written
by Barbara her spare time it depicts a hobby and the income from the same will not be
accepted to be a taxable one.
Answer 3
The issues arising from the given situation is whether the amount of loan repaid will be
taxable income for Patrick.
The main element of an income is the beneficial nature of the same that adds some value to
the taxable income of a person. This can be illustrated with the case of Hochstrasser v Mayes
(1960) AC 376.
An income is required to be received by the taxpayer as a gain to be subjected to taxation
under section 6-5 of the ITAA1997. This can be supported with the case of Federal Wharf Co
Ltd v. Deputy Commissioner of Taxation (1930) 44 CLR 24.

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In the present instance the loan has been provided by David to his son Patrick for an amount
of $52,000. The repayment was to be made for an amount of $58,000. The extra $6000 can
be observed as a gain. Moreover at the end of 5 years David has actually made the payment
of additional 5% upon the loan amount. This can be seen as a gain to have been attached to
the taxable income of Patrick.
Hence, the amount of loan repaid will be taxable income for Patrick.

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Reference
Brent v FC of T 1971 ATC 4195
FC of T v Whitfords Beach Pty Ltd 82 ATC 4031
Federal Wharf Co Ltd v. Deputy Commissioner of Taxation (1930) 44 CLR 24
Hayes v Federal Commissioner of Taxation [1956] HCA 21
Hochstrasser v Mayes (1960) AC 376
Tax Ruling 97/11
The Income Tax Assessment Act 1936 (Cth)
The Income Tax Assessment Act 1997 (Cth)