Taxation Theory, Practice & Law

This report presents solved assignments related to Taxation Theory, Practice & Law. It addresses several case studies, analyzing various tax-related scenarios. The first case involves calculating capital gains from short-term assets. The second examines the tax implications of a discounted loan for a bank executive. The third explores the tax implications of a joint property venture between a husband and wife. The fourth discusses the legal principles established in the IRC vs. Duke of Westminster case concerning tax avoidance. Finally, the fifth case study analyzes the financial implications of selling timber from a land owner's property. The report provides detailed calculations and legal interpretations for each case, offering a comprehensive understanding of taxation principles and their practical applications.

Running head: TAXATION THEORY, PRACTICE & LAW
TAXATION THEORY, PRACTICE & LAW

TAXATION THEORY, PRACTICE & LAW 2
Table of contents
Introduction......................................................................................................................................3
Question 1........................................................................................................................................3
Question 2........................................................................................................................................3
Question 3........................................................................................................................................5
Question 4........................................................................................................................................6
Question 5........................................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

TAXATION THEORY, PRACTICE & LAW 3
Introduction
With the help of the following assignment, the researcher has focused in the demonstration of
legal as well as taxation system that is present is a specific nation. For this purposes, five
different case studies have been taken into consideration. Another objective of this study is to
know the implementation of laws and regulations related to taxation that are associated with the
considered references by taking help from those provided by governmental bodies.
Question 1
Mr. Eric bought some shares along with some assets last year, which were again sold by him last
week within same year. Any share or asset that is held by a person or some stakeholder for less
than or equal to one year, is known to be a short-term asset. In the similar manner, any particular
asset or share that exists under the ownership of a single person for more than 12 months, is
supposed to be considered as a long-term asset. Hence, the assets those were purchased and sold
by Mr. Eric in the same year will fall under the category of short term assets.
Calculation of capital gain or loss due to short term assets for the last ended year
List of purchased shares and assets: List of shares and assets that were sold:
Shares from listed organization for $ 6,000
A flower vase of antique collection for $ 3,000
Home theatre Sound system for $ 11,000
A vintage chair worth $ 4,000
A canvas painting worth $ 10,000
Shares from listed organization for $ 21,000
A flower vase of antique collection for $ 4,000
Home theatre Sound system for $ 10,000
A vintage chair worth $ 3,000
A canvas painting worth $ 2,000
Total assets purchased = $ 34,000 Total assets sold = $ 39,000
Capital gain due to Short term for the previously ended year = total value of assets sold - total
value of assets purchased
= $ 40,000 - $ 34,000
= $ 6,000
Question 2
This particular case reference is about Mr. Brian, who happens to be a bank executive and has
received $ 1 million as loan at a discounted rate of 1%. The loan receiver also used 40% of the
loan to meet all payment obligations for interest as well as for purposes related to income

TAXATION THEORY, PRACTICE & LAW 4
producing. For the year 2016-2017, Brian also received some fringe benefit on the amount that
he took for loan. Moreover, it has been clearly observed that Brian was provided with the loan on
1st of April in 2016. Following is the calculations related to Brian’s taxable income for the year
that has ended on 30 June 2017.
Date when loan was received = 1st April 2016 (loan time = 3 years)
Loan Amount = $ 1 million
Interest Rate on loan = 1% (fringe benefit or discounted interest rate)
Actual interest rate on loans is nearly 15% all over the country
Repayment Mode for loan = per month installment
Amount of Loan used = $ 400,000 (40% of total loan that is $ 1 million)
Calculation for 15 months installments = 15 months * (1% / 12 months * $ 1,000,000)
= 15 months * ($ 10,000 / 12)
= $ 12,500
Calculation regarding income that is taxable for the year 2016-2017
Total Income = $ 1,000,000
Less: expenditures = $ 400,000
Less: installments repayment in the form of interest = $ 10,000
Less: installments repayment for principal = ($ 333,334 - $ 83,334) * $ 250,000
Total taxable income = $ 340,000
The tax has to be paid by Brian on taxable income of $ 340,000. This includes the monthly
installment consisting interest and principal on loan which is ($ 10,000 + $ 250,000) $ 21,667.
Therefore, it is observed that Brian needs to pay the reduced number of installments that is $
21,667. On contrary to this, if Brian intends to pay the installment at the end of loan, there would
be a different taxable income (AbdulRazaq & Adam, 2015).
Following is the Calculation.
Total Income = $ 1,000,000
Less: Expenditures = $ 400,000
Total income that is taxable = $ 600,000
Monthly repayment of all the installments seems to be a factor of benefit for Brian as the tax
needs to be paid on $ 340,000. However, on contrary to this, the tax needs to be paid on a higher
amount of $ 600,000 (Smith et al. 2016).

TAXATION THEORY, PRACTICE & LAW 5
If Brian is released by his bank from repaying the loan interest, only the principle value needs to
be paid by him. This will make Brian able to reduce the expenses but the fringe benefit cannot be
claimed from loan and tax needs to be paid on taxable earnings as calculated below.
Calculation of taxable earnings for 2016-2017
Total Income = $ 1,000,000
Less: expenditures = $ 400,000
Less: principal installments repayment = ($ 333,334 - $ 83,334) $ 250,000
Total earnings taxable = $ 350,000
Hence, it is visible that the tax needs to be paid on three different cases by Brian. $ 340,000 will
be the taxable amount if both interest and principal is paid in installment. However, $ 350,000
will be the tax amount if Brian is released from paying loan interest. In the last scenario, a certain
amount of tax needs to be paid on $ 600,000 if Brian prefers to pay installment by the end of
tenure.
Question 3
Jack, an architect borrowed some money along with his spouse Jill, a housewife with the aim of
buying a property to further rent it for tenants in a joint manner. The contract signed by the duo
mentions that 10% of the total profit will go to Jack and rest to his wife. Moreover, Jack has to
pay for every loss that occurs. A total loss of $ 10,000 needs to be paid by Paid as loss that
occurred last year.
As per Section 35(2) of Relationship Act of 2008, any individual cannot be a domestic partner of
some other individual co-tenancy and relationship ground (Bloom, 2015). However, Section 5(1)
of the Partnership Act of 1958 has described partnership to be as the relationship shared by two
or more stakeholders, who have the objective to earn profit from the same business (Mahar,
Longridge & He, 2016). This Act also described partnership’s characteristics for joint tenancy as
well as has given some provisions related to tenancy or property nature associated with joint
tenancy. This has mentioned that tenure of Joint Occupancy in part proprietorship or normal
property don’t make themselves a firm some asset that is to be held by inhabitants with the
intension of making benefits (McGee, Devos & Benk, 2016).
The Gross Returns sharing doesn’t make an association or a group of people have the enthusiasm
or basic right towards a property share the returns that can be utilized to earn the profits. In
addition, it is confirmed from the first sight that the business benefits made from an offer receipt

TAXATION THEORY, PRACTICE & LAW 6
be a man that the person in a business accomplice. However, such an offer’s receipt depends
upon the business benefits that make the individual personnel a business accomplice (Collins,
2016).
In this particular case, it can be observed that the couple has a domestic relation and has been
into a deal of joint tenancy that makes both the partners to entitle the profit in the ratio of 1:9.
However, one partner is supposed to pay for the losses under any circumstance. As per
provisions of Partnership Act and Relationship Act, it can be stated that there is a domestic
relationship that exist between Jack and his wife Jill. However, the case of Joint Tenancy attracts
Partnership Act and both of them are considered to be in a relation of partnership for similar
nature of business as well as both being entitled to profit but one that is Jack being entitled to
loss. The Partnership Act states that every partner is entitled to gain but not loss. If a person gets
a certain share from the profit but has to bear the complete loss, he or she will also be considered
as a partner of that particular business (Tran-Nam & Walpole, 2016).
Hence, Jack will bear the $ 10,000 loss entirely as well as he is likely to receive benefits due to
tax on a year’s loss. On the other hand, both the partners have to recover the losses that occurred
from the property before selling it. In this particular case however, no scope seems to be there for
loss recovery and hence, the property needs to be sold for capital loss. This loss will further be
adjusted along with the short term or may be long term capital gain.
Question 4
Facts held in of IRC vs. Duke case of Westminster in 1936
The deeds were exceeded with respect to the people by Duke as per his own utilization
(considering the plantation too) that was further covenanted by him to pay the people in the form
of weekly aggregates for the next seven years or the duration of existence of gatherings. As per
recounting of deeds, the installments were paid in the past administration’s acknowledgement
that Duke rendered dependably. Duke also aimed to make some arrangements for people despite
knowing about the fact that this might lead Duke to pay some compensation in accordance to the
administration in the future and might even put a halt on the work for Duke (Evans, 2015).
Letters recognized by company representatives for clarification purposes were dispatched to all
the employees informing them that for future work purposes, they can assert complete
compensation, which was normal and the employee will have to content with deed’s

TAXATION THEORY, PRACTICE & LAW 7
arrangements apart from the assumed aggregate. The conveying of aggregation installments
might e very essential up to the wages level that was held by him (King, 2016).
During the time of execution of beneficiaries, the deeds were able to settle the compensations
and wages by accepting them in Duke’s business after execution that made the firm to keep
availing the aggregates. This included the complete payable amount that was to be paid by the
deed as well as the measure of compensations or wages that were payable before time.
Issues highlighted in the case
On the other side, the sum of amounts that were paid under deeds with respect to the time span
by which Duke had the people underutilization compensated for administration, did not qualify
to be deducted from the total figures of Surtax risk for Duke. In that event, the total sums were
paid in the form of installments were the ones that were deductible. Ultimately, the main issue
was the clarification that whether the deeds were the administration’s compensations or
something else (Hodgson & Pearce, 2015).
The disposition
The installments did not come out to be the compensation for administrations as three out of the
five owners declined to consider the letter as an agreement and took it just as a reckoning or
expectation outflow. Moreover, four of the five owners favored that the letter was nothing but
merely an agreement that extra entirety can be alluded in the account even if the future
administrations related to an individual’s contribution are not complete, irrespective of the
probability of the letter being an agreement. It was contradicted by the fifth lord that the letter as
well as the deed is to be seen together as an element that focuses on keeping the administration’s
contract’s current high instead of adjusting it in a drastic manner (Comans, Moretto & Byrnes,
2017).
The recommendation that stated the principle of letting the courts overlook and respect the
problem substance and lawful position was dismissed by majority of crowds. The substance is
considered as something that is the outcome of gathering commitments that are found because of
lawful standards and rights.
Principles established in the case of Duke of Westminster
There is an offence that identifies in the Taxes Act with the name of ‘deceitful avoidance of
wage imposes’, and was presented initially in 2000. However, this particular enactment is

TAXATION THEORY, PRACTICE & LAW 8
nothing major portion of utilized period as the custom based laws frequently maneuver the
revenue during the time they indict (Krebs, 2016).
There may be some citizens that might be indicated momentarily for false bookkeeping or even
under the Theft Act. However, a major part of the cases related to tax avoidance is considered
under criminal offense based customary laws related to the swindling of income of general
society.
A person can be sentenced for life detainment along with repayment of revenue if found guilty
for such an offense (Lee et al. 2016). The distinction between tax avoidance and impose
shrinking was portrayed by Dennis Healey who was the former chancellor.
Question 5
This particular case states that Bill intends to use his own land to graze his sheep. However, the
major problem that emerges here is the presence of tall pine grooves that need to be cleared off.
It was discovered later by Bill that the timber could earn him about $ 1,000 for every 100 meters
from his land. As per the regulations stated under Sales of Goods Act in 1954, a sale contract can
be made in written with or without any seal as well as even by mouth’s word fully or partially
along with writing in a partly manner. With the mutual agreement of both the parties, the sale
contract’s amount can be fixed. In other words, both the involved parties need to sign an
agreement that bounds them to follow some rules related to sale and purchases of the items
(McCullagh, 2015). There is a possibility that the payment may not be received by the buyer post
fulfilling the seller’s needs. In this case, Bill is the seller who will get paid in exchange of timber
that will be acquired by a logging firm. Following are some of the highlights of what Bill will get
paid for if he agrees to sell the timber that is present in his fields of 4500 meters.
for every 100 meters, $1,000 will be paid to Bill
Hence, for every 1-meter Bill will receive $(1,000/100) = $10
For 4500meters land $(4500*10) $45000 will be given to Bill.
The calculations have stated that $45,000 will be paid to Bill by the logging company for
clearing the timber that is spread over 4,500 meters. This makes it a very ideal deal as there is no
investment that is to be made by Bill (Tran‐Nam et al. 2016).
As per a different phase of deal that will make Bill receive a lump sum amount of $50,000 from
logging company to clear the timber in accordance to the company’s requirements (Vitry &
Roughead, 2014). In case both the parties do not have an idea of total land that was covered

TAXATION THEORY, PRACTICE & LAW 9
under the timber, there is a chance that the company gives lesser payment for the total timber
present in the land area. Hence, there are chances of this deal to be beneficial as well as non-
beneficial.
Hence, as per the observations made in above case study, it can be concluded that the offer of
paying a $ 50,000 lump sum amount by the company to Bill will be the best deal. Considering
the deal that covers $ 1,000 for 100 meters of land will lead him to loss.
Conclusion
The evaluation of different cases in accordance to the laws related to taxation system has been
done in this study. On the basis of evaluations, the outcome says that Eric has managed to earn $
5,000 capital gain in first case and tax needs to be paid on $ 600,000 by Brian at the loan tenure’s
end in the second case.

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References
AbdulRazaq, M. T., & Adam, K. I. (2015). Anti-Avoidance Legislations: Issues & Doubts in the
Application of Tax Rules in Nigeria. AGORA Int'l J. Jurid. Sci., 1.
Bloom, D. (2015). Tax avoidance-a view from the dark side. Melb. UL Rev., 39, 950.
Collins, J. (2016). Fraud by Abuse of Position and Unlicensed Gangmasters. The Modern Law
Review, 79(2), 354-363.
Comans, T., Moretto, N., & Byrnes, J. (2017). Public Preferences for the Use of Taxation and
Labelling Policy Measures to Combat Obesity in Young Children in Australia.
International journal of environmental research and public health, 14(3), 324.
Evans, S. (2015). It's' Clean Hands' Again: The Dirtiness of Not Paying Tax Considered in the
Supreme Court.
Hodgson, H., & Pearce, P. (2015). TravelSmart or travel tax breaks: is the fringe benefits tax a
barrier to active commuting in Australia? 1. eJournal of Tax Research, 13(3), 819.
King, A. (2016). Mid market focus: The new attribution tax regime for MITs: Part 1. Taxation in
Australia, 50(10), 590.
Krebs, M. (2016). Analysis of the CSARS v NWK case and its effect on the substance over
form-doctrine.
Lee, A. J., Kane, S., Ramsey, R., Good, E., & Dick, M. (2016). Testing the price and
affordability of healthy and current (unhealthy) diets and the potential impacts of policy
change in Australia. BMC Public Health, 16(1), 315.
Mahar, F., Longridge, J., & He, J. L. (2016). The economic impact of a corporate tax rate cut in
Australia. Taxation in Australia, 51(3), 141.
McCullagh, R. (2015). The tangled web of Granny flat arrangements. LSJ: Law Society of NSW
Journal, (17), 82.
McGee, R. W., Devos, K., & Benk, S. (2016). Attitudes towards Tax Evasion in Turkey and
Australia: A Comparative Study. Social Sciences, 5(1), 10.
Smith, F., Smillie, K., Fitzsimons, J., Lindsay, B., Wells, G., Marles, V., & Atkinson, I. (2016).
Reforms required to the Australian tax system to improve biodiversity conservation on
private land. Environmental and planning law journal, 33(5), 443-450.
Tran-Nam, B., & Walpole, M. (2016). Tax disputes, litigation costs and access to tax justice.
eJournal of Tax Research, 14(2), 319.

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Tran‐Nam, B., Evans, C., Krever, R., & Lignier, P. (2016). Managing tax complexity: the state
of play after Henry. Economic Papers: A journal of applied economics and policy, 35(4),
347-358.
Vitry, A., &Roughead, E. (2014). Managed entry agreements for pharmaceuticals in
Australia. Health Policy, 117(3), 345-352.