Reference no: EM133062488

CGT

Question 1. Anita is a client of yours. To fund her career as an artist Anita sold some of her art collection by other artists. It consisted of:
(a) An antique ceramic bowl purchased in February 1985 for $4,000. She sold the bowl on 1 December of the current tax year for $12,000.
(b) A sculpture purchased in December 1993 for $5,500. She sold the sculpture on 1 January of the current tax year for $6,000.
(c) A bronze ?gure purchased in October 1987 for $14,000. She sold the bronze ?gure on 20
March of the current tax year for $13,000.
(d) A painting purchased in March 1987 for $470. She sold the painting on 1 July of the current tax year for $5,000.
Consider the CGT consequences of the above transactions.

Question 2. Are the following CGT assets, collectables or personal use assets:
(a) An engagement ring which cost $5,000?
(b) A second-hand car purchased for $2,000?
(c) Shares in BHP?
(d) Your home?
(e) A painting hung in the foyer of your accounting ?rm?
(f) A holiday house at Byron Bay?

Question 3. What CGT events apply to the following transactions:
(a) You sell shares in BHP for $5,000.
(b) You receive $100,000 in return for signing a three-year contract to play AFL with the Brisbane Lions.
(c) You sell your holiday home at Byron Bay for $750,000.
(d) You sell your hairdressing salon for $200,000 and receive an additional $20,000 for agreeing not to open another salon within a 10 km radius for the next three years.
(e) You pay Shelby $50,000 for the option to purchase her hairdressing salon in three years' time.
(f) In three years' time you exercise the option to purchase Shelby's salon for $300,000.
(g) You sell a diamond ring for $20,000. You paid $12,000 for the ring in 1984.

Question 4. John Webb, aged 35, has always been an Australian resident. During the current income year, he married Kate, an English resident, and they decided to make their home in the United Kingdom indefinitely. He left Australia on 30 September in the current year.
John owns the following assets:
A house in Melbourne. He bought the house seven years ago as a rental property. He is keeping the property.
4,000 shares in Telstra - a public company listed on the Australian Stock Exchange. He will keep the shares.
A Hyundai Excel car that he had bought five years ago for $16,000. Before he leaves for the United Kingdom he sells the car to his brother for $4,000.
A vacant block of land in New Zealand. He bought the land three years ago, with the idea he would eventually build a holiday cottage there. He is keeping the land.
Advise John whether there are any capital gains tax (CGT) implications in respect of the above assets upon leaving Australia.

Question 5. Malcolm Rich purchased a block of land on 22 June 1991 for $100,000. He plants trees on the land on 20 October 1995 at a cost of $20,000, for landscaping and to provide shade. He sells the land to Ian Solvent on 15 January in the current year for $200,000, payable in eight monthly instalments of
$25,000 each, commencing on 15 January, with the final instalment due on 15 August next year. Calculate Malcolm's net capital gain for the current year assuming no other CGT events have occurred. What would be the effect if Solvent fled the country on 7 July and the final two instalments were never received by Rich? Assume Solvent had sold the land prior to departure and there is no possibility of recovering the final two instalments.

Question 6. Jim Grocer purchased a retail outlet in 1982 at a cost of $700,000.
On 21 September 1985, he added a liquor outlet at a cost of $100,000. On 1 September during the current income year, he sold the integrated business for $2 million.
What, if any, are the income tax implications?

Question 7. On 1 December 1984, Kim and Lee purchased a house as joint tenants, at a cost of $100,000. On 31 December 2006, when the house was valued at $220,000, Lee purchased Kim's interest for $110,000. Lee sold the house on 30 June in the current income year for $450,000.
Advise Lee of the income tax implications, assuming:
the house was Lee's main residence; or
the house was let to tenants.