Reference no: EM132465455

Section A

• Deena Maguire is a tax lawyer who regularly travelled overseas for work. After having a baby in late 2015 she took unpaid leave from work to travel around the world. Traveling with an infant required much preparation and a reasonable amount of equipment. Deena enjoyed researching and testing travel gear, and as a consequence she developed a reasonable knowledge about traveling with young kids. In April 2017 Deena had an idea to start a travel blog to share her experiences with other parents and keep memories of her trips.

• She registered her blog's domain 'www.babymaguire.com' with a paid host server at a cost of $20 per year and frequently posted tips about airlines, kid-friendly hotels and product reviews of the travel gear she used. She also regularly shared her blog photos and the links to her posts on her Instagram account and Facebook page, which generated thousands of 'likes' and substantially increased the number of visitors to her website. In July 2017 a baby pram manufacturer invited Deena to test and review on their latest ultra-lightweight travel pram. She would not receive any money for the review however she could keep the pram, which was retailed for $600. In January 2018 a resort in Fiji offered her 1-week free accommodation (valued at $2,000) in exchange for a blog post about her stay. Offers of that kind became frequent, and in the current income year (2018/19) she estimates having received a total of $42,000 in benefits, $38,000 in advertising fees, and her travel expenses amounted to $14,000. Moreover, to ensure that her "Instagram" skill is getting better, she enrolled in online course of photography and bought herself fancy camera, which cost her $3,000 and $2,000, respectively. Due to her many "views" in her videos, she received a lump sum payment of $10,000 from Youtube by the end of financial year.

Required:

Question 1: Advise Deena Maguire on the tax consequences of the above for the income year ending 30 June 2019, applying legislation, case law and tax rulings to support your answer.

Section B

• In July 2019 Deena Maguire secured a 4-year advertising agreement with 'La Leche', a manufacturer of baby formula. The agreement granted La Leche the right to advertise its brand and its products on Deena's website in exchange for a monthly fee of $3,000 and she must pay monthly host fees of $60. In March 2020 (stopping her payment of $3,000) , La Leche was taken to Court under allegations that its products contained prohibited substances, which led to the immediate cancellation of all its advertising contracts. As a result, La Leche and Deena negotiated the termination of their contract upon La Leche paying Deena a termination fee corresponding to the expected loss of profits for the remaining of the contracts. The amount of $90,200 was paid to Deena on 1 June 2020. Although, this legal case may affect Deena's reputation, many online influencers and general public believe that Deena just got caught in the middle of unfortunate case. Once the legal case is ended, she received offer to become to become head of social media account of Johnson and Johnson. Further, due to complicated legal issue, Deena must pay $10,000 legal case at 25th June 2020. To celebrate her winning Deena, she donates $200 to local church the day she received money from her legal case. Lastly, due to Deena's reputation as social media influencer, Deena received Christmas hamper in December 2019 worth $5,000 from Facebook.

Required:

Question 1: Advise Deena Maguire on the tax consequences of the above for the income year ending 30 June 2020, applying legislation, case law and tax rulings to support your answer.