Laws of Taxation Assignment: Case Study Analysis, Semester 1

This assignment delves into various aspects of taxation laws, analyzing several case studies to illustrate key principles. The first case examines the estimation of capital losses and gains from asset sales under the ITAA 1997, concluding that losses from personal assets cannot be offset against profits from ordinary assets. The second case addresses the ascertainment of FBT, based on taxation rulings of TR 93/6, determining that if a bank does not reimburse interest on a loan, the client is not liable for income tax. The third case explores the allocation of losses from rental property owned jointly, referencing TR 93/32 and F.C. of T. v McDonald (1987), concluding that losses are divided equally between co-owners. The fourth case considers tax avoidance, referencing IRC v Duke of Westminster [1936] AC 1 and WT Ramsay v. IRC principles. The final case estimates income from timber sales under subsection 6 (1) of the Income Tax Assessment Act 1936, determining that income from cutting timber is taxable. The assignment provides a thorough overview of taxation principles and their practical application.

Running head: LAWS OF TAXATION
LAWS OF TAXATION
Name of student:
Name of University:
Author note:

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Table of Contents
Answer 1..........................................................................................................................................3
Answer 2..........................................................................................................................................4
Answer 3..........................................................................................................................................5
Answer 4..........................................................................................................................................6
Answer 5..........................................................................................................................................7
References........................................................................................................................................8

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Answer 1
Given the case, the main issue that arises here deals with the estimation of capital losses
and gains from sale of assets as per the rules and regulations defined “under section 108-20 of
the ITAA 1997”
Regulations Applicable
i. “Section 108-20 of the ITAA 1997”
ii. “Section 108-10 of ITAA 1997”
The analysis has been done as per Taxation rules and regulations of Australia. Law
“section 108-20 of the ITAA 1997”, shows that loss of $1,000 for the home sound system cannot

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be taken as set off, because losses cannot be considered on dumping of personal assets for any
considered parties (King & Dickens,2012).. Case here shows that , Eric obtained a significant
amount of profit $15000 from the sale of ordinary assets. This offset can be undertaken as per
“Section 108-10 of ITAA 1997”.
From the above analysis, the conclusion that can be drawn is ,Eric has gained profit from
the sale of assets so he cannot offset the loss from the given collectables (Dabner, 2015)..
Answer 2
The main issue that is highlighted in this case deals with the ascertainment of FBT as per
““Taxation Ruling of TR 93/6”.
The application of the above mentioned law in this case can be evaluated with the help of
computation of FBT

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As per “taxation rulings of TR 93/6 , financial organizations take steps for offsetting the
loan account that is regarded as interest offset agreement”. For to this reason, the concerned
clients are not liable to pay income tax from the earnings gained from their account. From the
above tax ruling, it can be shown that if the bank disagrees to reimburse interest on loan to Brian,
then he will not accountable to pay any amount of income tax (Travers, 2014). .
It can be concluded from the case that Brian will not accountable to pay any kind of
income tax if the bank do not reimburse his interest on loan.
Answer 3
Here the case deals with the issue of allocation of loss amount that is derived from the
rental property which is owned under joint ownership of Jack and Jill. Taxation laws that are
applicable here are: Taxation rulings of TR 93/32 & F.C. of T. v McDonald (1987)

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As per the “Taxation rulings of TR 93/32”, co-ownership rental property is considered as
an ordinary partnership. This is also liable of paying appropriate income tax . This kind of law
application is applicable to any kind of individual parties. Given case study shows , Jack and Jill
has a rental property on co-ownership and this property is eligible for taxable purposes and thus
cannot be considered as partnership under general law. However, since they are co-owners of
the property, they are eligible to share the profit and losses that is earned from their rental
property (Gordon,2016)..
Now with reference to the case, “F.C. of T. v McDonald (1987)”, the tax payer and his
wife own two state units. The amount of percentage of profit and losses was preset by both the
parties. Similarly, in this case, since it is not preset, so the losses will be divided equally
(Gustafsson, 2013)..
It can be concluded from the case that the losses between Jack and Jill will be divided
evenly and joint ownership business is not eligible for partnership business.
Answer 4
The given case “IRC v Duke of Westminster [1936] AC 1” is set as one of the prime
examples of incidence of tax avoidance. This case shows one principle that each tax payer is
permitted to order all his/her affairs. However, this ruling is not that useful in case of
multifaceted tax structures under the law (Prebble,2012)..
“WT Ramsay v. IRC principle” can be considered as more restrictive compared to above
law. This principle shows that if person is successful in the given result, then he is not bound to
pay any increased sum of tax and thus it allows individuals as well as corporate to reshuffle all

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their agreements in order to meet their particular objectives of lowering the taxable amount
(Sceales, 2015)..
Answer 5
This case study deals with the estimation of income from the sale of felled timber under
subsection 6 (1) of the Income Tax Assessment Act 1936”. Laws that are applicable in this case
are:
o “Subsection 6 (1) of the Income Tax Assessment Act 1936”
o “McCauley v. The Federal Commissioner of Taxation”
The case study shows that, Bill is owner of a piece of land which consists of pine
trees. He principally intended for grazing of sheep and wanted to clear it. He finds a lodging
company who is agreeable to give him $100 for every 100 meters of land. As per “taxation
ruling related to 95/6” gives a appropriate view regarding the tax consequences for income that is
generated from the actions of primary production(Bevacqua, 2015). The ruling states that there is
a limit to the receipts from the sale of timber . In the case here shows that, Bill is the owner of
land, in his area he did not plant any tree. However, the whole sum of money received from the
sale of timber is his income (Budak, James & Sawyer,2016).Therefore, it can be seen that the
trees are considered as assessable income of the tax payers “under subsection 6 (1) of the
Income Tax Assessment Act 1936”. On the contrary, if Bill pays an amount of $50,000, then the
revenue can be considered as Royalties, as per section 26 (f). The total sum earned by Bill as
royalty is his assessable income (Bevacqua, 2015)..

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From the case it can be concluded that, income from cutting timber from trees can be
considered as taxable income for Bill under “subsection 6 (1) of the ITAA 1997” (Budak, James
& Sawyer,2016).

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References
Bevacqua, J. (2015). ATO accountability and taxpayer fairness: An assessment of the proposal to
split the Australian taxation office. UNSWLJ, 38, 995.
Budak, T., James, S., & Sawyer, A. (2016). International experiences of tax simplification and
distinguishing between necessary and unnecessary complexity. eJournal of Tax Research, 14(2),
337.
Dabner, J. H. (2015). Tax Simplification–An Accident Looking for a Place to Happen?.
Gordon, R. (2016). Increasing use of tax-transparent entities by private groups due to BEPS. Tax
Specialist, 19(4), 136.
Gustafsson, T. (2013). The role of dendritic cells in adjuvant-induced immune responses.
King, A., & Dickens, A. (2012). Racing, breeding and training: A thoroughbred taxing
business!. Taxation in Australia, 47(5), 263.
Prebble, Q. C. (2012). Jurisprudential Perspectives of Taxation Law: Manifesto.
Sceales, R. W. F. (2015). A review of the trend in the judicial interpretation, and judicial
attitudes towards tax avoidance in the United Kingdom, Australia and South Africa, with
reference to the" declaratory" and" choice" theories of jurisprudence (Doctoral dissertation).
Travers, G. (2014). Established positions. Tax Adviser's Guide to Part IVA: A Practical Guide to
the Application of the General Anti-avoidance Rule, The, 41.

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References