Chat with us, powered by LiveChat Discuss whether Fred is a resident of Australia fo - Writemia

Discuss whether Fred is a resident of Australia fo

Discuss whether Fred is a resident of Australia for taxationpurposes.Question 2 (5 marks)Explain why the receipts in Egerton-Warburton & Ors v DFC of T (1934) 51 CLR 568 were assessable, but the receipts in IRC v Ramsay (1935) 1 All ER 847 were treated as capital amounts.Question 3 (10 Marks)Your client is an investor and antique collector. You haveascertained that she is not carrying on a business. Your client provides the following information of sales of various assets during the current tax year. Based on this information, determine your client’s net capital gain or net capital loss for the year ended 30 June of the current tax year.(a) Block of vacant land. On 3 June of the current tax yearyour client signed a contract to sell a block of vacant land for $320,000. She acquired this land in January 2001 for$100,000 and incurred $20,000 in local council, water andsewerage rates and land taxes during her period of ownership of the land. The contract of sale stipulates that a deposit of $20,000 is payable to her when the contract of sale is signed and the balance is payable on 3 January of the next tax year, when the change of ownership will be registered.(b) Antique bed. On 12 November of the current tax year your client had an antique four-poster Louis XIV bed stolen from her house. She recently had the bed valued for insurance purposes and the market value at 31 October of the current tax year was $25,000. She purchased the bed for $3,500 on 21 July 1986. Although the furniture was in very good condition, the bed needed alterations to allow for the installation of an innerspring mattress. These alterationssignificantly increased the value of the bed, and cost $1,500.She paid for the alterations on 29 October 1986. On 13November of the current tax year she lodged a claim with her insurance company seeking to recover her loss. On 16January of the current tax year her insurance companyadvised her that the antique bed had not been a specifieditem on her insurance policy. Therefore, the maximumamount she would be paid under her household contentspolicy was $11,000. This amount was paid to her on 21January of the current tax year.(c) Painting. Your client acquired a painting by a well-knownAustralian artist on 2 May 1985 for $2,000. The painting hadsignificantly risen in value due to the death of the artist. Shesold the painting for $125,000 at an art auction on 3 April ofthe current tax year.(d) Shares. Your client has a substantial share portfolio whichshe has acquired over many years. She sold the followingshares in the relevant year of income:(i) 1,000 Common Bank Ltd shares acquired in 2001 for $15per share and sold on 4 July of the current tax year for$47 per share. She incurred $550 in brokerage fees onthe sale and $750 in stamp duty costs on purchase.(ii) 2,500 shares in PHB Iron Ore Ltd. These shares were alsoacquired in 2001 for $12 per share and sold on 14February of the current tax year for $25 per share. Sheincurred $1,000 in brokerage fees on the sale and $1,500in stamp duty costs on purchase(iii) 1,200 shares in Young Kids Learning Ltd. These shareswere acquired in 2005 for $5 per share and sold on 14February of the current tax year for $0.50 per share. Sheincurred $100 in brokerage fees on the sale and $500 instamp duty costs on purchase.(iv) 10,000 shares in Share Build Ltd. These shares wereacquired on 5 July of the current tax year for $1 per shareand sold on 22 January of the current tax year for $2.50per share. She incurred $900 in brokerage fees on thesale and $1,100 in stamp duty costs on purchase.(e) Violin. Your client also has an interest in collecting musicalinstruments. She plays the violin very well and has severalviolins in her collection, all of which she plays on a regularbasis. On 1 May of the current tax year she sold one of theseviolins for $12,000 to neighbour who is in the QueenslandSymphony Orchestra. The violin cost her $5,500 when sheacquired it on 1 June 1999.Your client also has a total of $8,500 in capital losses carriedforward from the previous tax year, $1,500 of which areattributable to a loss on the sale of a piece of sculpture which she sold in April of the previous year.Prescribed Textbook (compulsory)Deegan, C. (2012), Australian Financial Accounting, 7th ed., McGraw-Hill Australia.ReferencesGodfrey, J., Hodgson, A., Tarca, A., Hamilton, J., and Holmes, S. 2010. Accounting Theory, 7th ed., John Wiley.Deegan, C., 2013. Financial Accounting Theory, 4th edition, McGraw Hill Book Company, Sydney.ICAA. 2014. Financial Reporting Handbook 2014, The Institute of Chartered Accountants in Australia, John Wiley & Sons Australia

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