Taxation, Theory and Practice 1 Assignment - University Homework

This assignment solution addresses various taxation issues, including capital gains and losses under ITAA 1997, the concept of Fringe Benefits Tax (FBT) and its calculation, and income computation from the sale of timber. The solution analyzes scenarios involving asset sales, loan fringe benefits, property rentals, and tax avoidance cases. The assignment covers relevant legislation, such as Section 108-10 and 108-20 of ITAA 1997, the FBT Act 1986, and various taxation rulings. The solution provides detailed calculations, applications of legislation, and conclusions for each issue, supported by relevant case laws and references. It explores topics like net capital gain/loss estimation, taxable value of loan fringe benefits, co-ownership of properties, and income from timber sales, offering a comprehensive analysis of complex taxation scenarios.

Running head: TAXATION, THEORY AND PRACTICE
TAXATION, THEORY AND PRACTICE
Name of the Student
Name of the University
Authors Note

1TAXATION, THEORY AND PRACTICE
Answer 1
Issues
The scenario given in this case highlights the problem of capital gains or loss estimation
that is given under the section 108-10 of ITAA 1997.
Legislation
a) Section 108-10 of ITAA 1997
b) Section 108-20 of ITAA 1997
Asset Description Cost Base Capital Proceeds
Capital
gain Capital loss
Antique Base 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
Estimation of net capital loss for
the given year
Particulars Total Amount ($)
Loss on the sale of Anitque Chair 2000
Loss on the sale of Painting 8000
Less: Profit on sale of Antique
Vase 1000
Total Loss to be carried forward 9000
Estimation of net capital gain for
the given year
Particulars Total Amount ($)
Profit obtained from sale of shares $15,000

2TAXATION, THEORY AND PRACTICE
Applications of legislations
By the section 108-20 of ITAA 1997, it can be put forward that huge loss has been
incurred by Eric from sale of home sound system (Piketty 2012). This loss is not permitted to
offset as it depicts private utilization of asset by Eric. This section illustrates that no loss is
allowed for subtraction as against sale of market shares. On the contrary, the collectibles are
offset against gains that Eric obtains from common asset only as stated under this legislation
(Furnivall 2014).
Conclusion
The above case shows that Eric attains capital gains from common asset and cannot offset
loss from personal asset sale.
Answer 2
Issue
This case elucidates FBT concept accompanied with FBT ascertainment under FBT Act 1986.
Legislations
a) Taxation Ruling of TR 93/6
b) FBT Act 1986
Evaluation of FBT
Taxable value of the loan fringe benefit
In the books of Brian for the year ended 2016/17
Estimation under statutory and actual rate of interest rate
Statutory Rate Actual Rate

3TAXATION, THEORY AND PRACTICE
Particulars
Total Amount
($) Total Amount ($)
Loan Amount 1000000 1000000
FBT Amount 40%use in business 400000 400000
Statutory rate of interest @5.65% 2825 500
(Loan Amount *Statutory rates of interest)-(Loan
Amount*Actual rate of interest)/12*60%business use
Taxable value of the loan fringe benefit 2325
FBT at the end of loan on payment interest at the end of
loan
Statutory rate Actual rate
Particulars Total Amount Total Amount
Loan Amount 1000000 1000000
FBT amount 40% use in the business 400000 400000
Statutory rate if interest @5.65% 33900 6000
(Loan Amount*Statutory rate of interest)-(Loan
Amount*Actual rate of interest)*60%business use
Taxable loan value fringe benefit 27900
Application of Legislation
In accordance with Taxation Ruling TR 93/6, it is apparent that any financial
organization can set off the interest on loan that taxpayers is liable to pay (Oats 2012). From
this case, it can be illustrated that Brian will not have any liability to pay the loan interest or
income tax on such loan amount.
Conclusion
This case elucidates that Brian will not pay any income tax or interest rate on loan that he
acquires.

4TAXATION, THEORY AND PRACTICE
Answer 3
Issue
This issue deals with estimation of loss that Jack and Jill suffers from that property which they
rents
Legislation
a) FC of Tv Mc Donald (1987)
b) Section 51 of the ITAA 1997
c) Taxation Rulings of TR 93/23
Application of legislation
The taxation Rulings TR 93/23 illustrates co-ownership of properties that individual rents
as partners. This case reflects that Jack and Jill were partners of the rented property who made an
agreement for sharing profit(Wagner 2013). This agreement shows that Jack will have to carry
the loss obtained from rented property. The FCof TV Mc Donald defines that both the taxpayers
were considered as joint owners of rented property. Under common law, it can be said that Mr
Mc Donald and his wife had no partnership agreement between them.
Conclusion
It can be said that as Jack and Jill were joint owners, the losds amount incurred by them
will be allocated between them in equal way.

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Answer 4
The IRC v Duke of Wetminister [1936] AC 1 elucidates tax avoidance incidence. The
WT vs IRC principle holds the fact that court will have more restriction in the coming years
(Mellon 2016). This case reflects that arrangement of transacted amount is done artificially and
is not utilized as commercial purpose.
Answer 5
Issue
The issue presented here is income computation from sale of felled timber that is defined
under subsection 6(1) of Income Tax Assessment Act 1936.
Legislation
a) Subsection 6(1) of the Income Tax Assessment Act 1936
b) Mc Cauley v The Federal Commissioner of Taxation
Application of legislation
Under this situation,. Bill aspired to used the land for grazing sheep and planned to
remove the planted trees. Subsection 6(1) reflects that taxpayers gets involved in activities of
forest. The receipts that Bill obtains involve earnings from tax payers, which has been
considered as Royalties (Schreiber 2013). Hence, trade of forest operations will be carried by
Bill and receives royalty that includes assessable income.
Conclusion
Amount obtained from timber is termed as taxable proceed under this subsection 6(1).

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References
Schreiber, U., 2013. International company taxation: an introduction to the legal and economic
principles. Springer Science & Business Media.
Mellon, A.W., 2016. Taxation: the people’s business. Pickle Partners Publishing.
Picciotto, S., 2012. Towards unitary taxation of transnational corporations(pp. 1-17). Tax
Justice Network.
Wagner, R.E., 2013. Charging for Government (Routledge Revivals): User Charges and
Earmarked Taxes in Principle and Practice. Routledge.
Becker, J., Reimer, E. and Rust, A., 2015. Klaus Vogel on Double Taxation Conventions. Kluwer
Law International.
Dubin, J.A. and Wilde, L.L., 1988. An empirical analysis of federal income tax auditing and
compliance. National tax journal, pp.61-74.
Oats, L. ed., 2012. Taxation: A fieldwork research handbook. Routledge.
Piketty, T. and Saez, E., 2012. Optimal labor income taxation (No. w18521). National Bureau of
Economic Research.
Furnivall, J.S., 2014. Colonial policy and practice. Cambridge University Press.
Piketty, T. and Saez, E., 2012. A theory of optimal capital taxation (No. w17989). National
Bureau of Economic Research.

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Piketty, T. and Saez, E., 2013. A theory of optimal inheritance taxation. Econometrica, 81(5),
pp.1851-1886.
Rothschild, C. and Scheuer, F., 2014. A theory of income taxation under multidimensional skill
heterogeneity (No. w19822). National Bureau of Economic Research.

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