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Question 1 ? Assessable income (9 marks) Outline...




Question 1 ? Assessable income (9 marks) Outline the issues to consider when deciding whether a receipt is income according to ordinary concepts. You should discuss relevant cases. Identify at least three (3) examples of ordinary income. Explain how it is different to statutory income and exempt income. Discuss, with reference to legislation or case law, whether the following are ordinary income, statutory income or exempt income in the hands of the recipient: ? A gift received from a close friend who is also a former employer ? A lump sum amount of $8,000 received by an employee for a broken leg suffered as a result of an accident at work ? A furniture retailer receives $12,800 commission from a supplier for selling goods on consignment ? A cash prize of $500 for being named ?employee of the month? ? Profit of $6,000 from the sale of shares by an insurance company ? John was reimbursed $1,100 for half of the cost of a new fence between his residential rental property and a neighbour. You should explain why you have come to your decision in each case above. Question 2 ? Fringe benefits tax (7 marks) Discuss the necessary criteria for determining whether a fringe benefit has been provided. Outline, with reference to legislation, whether the following are fringe benefits, and if so, how to calculate the value of the benefit: ? Employer paid $1,400 for an annual rail/bus ticket for an employee to use exclusively for travel between home and work each work day. ? A company pays $5,000 of the private school fees on behalf of the child of its Chief Financial Officer. ? A car is provided for employee sales representatives to visit customers each business day. The car can also be used by employees on weekends and holidays. ? An employee is given a $150 award by his employer for improving safety conditions in the business. 16 ACC00132 ? Taxation Question 3 ? Deductions (8 marks) Discuss the tests developed by court cases to distinguish between losses and outgoings on revenue account and on capital account. Discuss the deductibility, with reference to legislation or case law, of the following losses or outgoings of Michael, a solicitor: ? Professional association fees of $1,200. ? Law textbooks to the value of $950 purchased as part of his professional library. ? He has paid $5,000 in course fees for a post-graduate degree in accounting, which he hopes will lead to a career in taxation law once completed. ? He purchases a laptop costing $1,650 to use for work purposes, although he will use it for private purposes 10% of the time as well. You should explain why you have come to your decision in each case above. Question 4 ? Capital gains (8 marks) Justin, aged 58, is about to sell his lawn mowing business that he has owned for 14 years, and has come to you for advice to minimise his tax in relation to the sale. He estimates he will make a gain on sale of $90,000. He is considering moving overseas permanently and selling this business as well as a rare artwork and a canoe he acquired in September 2012. Advise Justin of the capital gains tax implications if he sells these assets now. Discuss whether any


Paper#3036 | Written in 18-Jul-2015

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