Reference no: EM132133043

Questions -

Question 1 - On 20 September 2005 Louisa paid $500,000 for an investment property and incurred the following costs:

• In October 2005 stamp duty and legal costs on acquisition $25,000
• In June 2010 Louisa added an upstairs extension to the property at a cost of $250,000
• In November 2015 Louisa paid $5,000 legal costs to defend title to her property as a result of a dispute with a neighbour in respect to the boundary line.
• During the period of time Louisa owned the property she paid $25,000 rates and taxes which were tax deductible.

On1 June 2017 Louisa sold the property. The sale price was $1,500,000.

Louisa had a prior year capital loss amounting to $40,000

(a) Calculate the cost base of the property.

(b) What type of CGT event is the sale of this property? Calculate the capital gain Louisa made that's liable to capital gains tax.

Question 2 - Which (if any) of the following expenses would be 'incidental and relevant' and have an essential character that stamps them as 'business' as opposed to 'living' expenses. Cite relevant law.

(a) hairdressing costs by a model. Would your answer be different if she had 3 hair dressing appointments per week on average to meet requirements of her clients/employers?

(b) additional food and vitamins and consumed by a professional athlete;

(c) sunscreen worn by a bricklayer;

(d) an alarm clock owned by a night-shift worker;

(e) moisturising cream worn by a flight attendant.

Question 3 - Consider whether any of the following will be depreciable items under s 40-30 of the ITAA and give reasons why?

(a) Buildings in respect of which Div 43 deductions are available:

(b) Patents

(c) Goodwill:

(d) Land:

(e) Trading stock:

Question 4 - On 1 April 2017 Yan's employer gave him a $100,000 loan at a low rate of interest (2.25%). He used $70,000 to buy his home which is his main residence, and $30,000 to buy a rental that he receives rent from.

Advise Yan's employer as to the FBT and income tax consequences of the above loan arrangement (including any deductions the employer might be entitled to) and calculate the FBT payable. Assume the employer is not liable to GST.