Reference no: EM133023121 , Length: word count:2000

LAW6001 Taxation Law

Assessment: Case Study

Learning Outcome 1: Identify and analyse the tax treatment of various types of income and deductions.
Learning Outcome 2: Apply the legislation to determine the assessable income and availability and amount of the tax deduction associated with capital and repair.
Learning Outcome 3: Calculate the specific deduction associated with repair.
Learning Outcome 4: Preparation and calculation of net capital gains.

Task Summary

In response to the issues raised in the case study provided, research and develop a 2000-word tax advice that addresses (a) assessable income (b) allowable deductions (c) calculations of income/deductions and (d) your conclusions and recommendations.

Context
This assessment assesses your research skills, your ability to synthesise an original piece of work to specific content requirements and your ability to produce a comprehensible piece of advice which addressing the client's needs.
It also assesses your written communication skills. The ability to deliver to a brief is an essential skill in the workplace. Clients may well approach advisors seeking a combination of specific information needs and advice on the tax implications of a particular arrangement in the Australian tax jurisdiction. It is therefore important to be able to identify all the issues presented by an arrangement and to think about the potential consequences of different approaches to addressing the client's needs.

Task Instructions

• Your case study needs to identify and discuss the tax implications of the various issues raised.
• A report (word document, approx. 2,000 words) must be submitted for the calculations of the assessable income; allowable deductions and taxable income of the taxpayer including identifying and discussing them. E.g., how the amounts of income & deductions have been derived. If any receipts and payments are not assessable or deductible, the reasoning for non-inclusion of these in assessable income or deductions as per relevant legislation or cases.
• Critically analyse the following case study. With respect to each task:
• Review relevant case law and legislation (ITAA1936, ITAA1997)
• Apply the law to the facts of the case study
• Reach a conclusion/ give practical advice to your client.
• You will be assessed in accordance with the Assessment Rubric.
• This case study must be presented as an individual effort. The case study requires individual research. It is expected the student will survey the relevant literature, including decided cases, and select appropriate additional resources.
• Your case study is not just a list of answers. Your reasons for your conclusions and recommendations must be based on your research into the relevant cases and legislation.
• The format of the report should be a business report and using APA referencing style

Referencing
It is essential that you use appropriate APA style for citing and referencing research.

Case Study: Comprehensive Individual Tax Return Advice

Question 1
On 17 July 2020, Ken Fong acquired a restaurant as a going concern, paying $850,000 for the land and buildings, plant and equipment and goodwill. Upon taking possession Ken realised that the plumbing and electrical systems required repairing.

In August 2020 he spent $27,000 for the repairs so that the restaurant could open for business. Shortly after opening, the tiles in the kitchen cracked and fell off the walls. Ken had them replaced, restoring them to their original condition, costing $6,400.

In November 2020 Ken decided to replace all the kitchen cooking equipment in order to reduce the likelihood of having to replace it in the future. The cost was $30,000. At the same time Ken entered into a contract to have the equipment regularly inspected and serviced. The contract fee was $1,500 per year. At that time, he also decided to pay a pest control company $2,000 a year to rid the restaurant of pests and ensure health and safety standards were maintained.

In January 2021 a violent summer hail storm caused damage to the roof of the restaurant. Instead of making repairs, Ken decided to replace the entire roof along with the roofing insulation and ducted air conditioning. The roof replacement cost $32,000 and the insulation and air conditioning added another cost of $7,400. At that time Ken contracted builders to construct an additional room to cater for increased patronage. The cost of the addition was $26,800.

Required
With reference to relevant legislation and cases, advise Ken on the deductibility of the expenditure incurred on repairs and improvements to his restaurant in August 2020, November 2020 and January 2021.

Question 2
Maurice is an individual tax resident of Australia for tax purposes. He has the following assets:
• His home was acquired on 20 February 1989 for $140 000. The home was never used for any income producing purpose. The estimated market value of the house on 1 March 2018 is
$310,000
• Shares in FUL Pty Ltd acquired on 10 April 1984 at a cost of $15 000.
• Furniture acquired on 20 May 2010 for $10,500.
• Yacht acquired on 9 July 2020 for $25,000
• Block of vacant land acquired on 20 June 1997 at a cost of $100 000. The estimated market value of the vacant block on 15 May 2021 is $475,000.

Maurice subsequently sold the following assets during 2020-2021 (arm's length transactions):
• His home was sold on 1 March 2021 for $325,000
• The FUL Shares were sold on 15 March 2021 for $19,000
• The furniture was sold on 1 May 2021 for $5,000
• The yacht was sold on 29 June 2021 for $37,000
• The block of vacant land was sold on 30 May 2021 for $465,000.

Maurice also has a carry forward capital loss of $12,500 from the sale of an antique drumkit and a carry forward capital loss $5,000 from the sale of underperforming shares in an earlier income year. Maurice is not a share trader.
Maurice has also incurred interest expenses on the vacant block of land of $110,000 over the time he owned the vacant block. He never used the vacant block for any income producing purpose.

Required
With reference to relevant legislation and cases calculate the net capital gain or loss as applicable for Maurice for the 2020/21 income year. You must show all possible methods to calculate capital gains (you must reference each step in the process to the relevant legislation. The numbers in the calculation will not be sufficient) and identify reasons why inclusion/exclusion of all capital gains tax assets.

Attachment:- Taxation Law.rar