Reference no: EM13841861 , Length: 2500 words

Please write your response in 2500 words count

Case Study one
Assessable Income

Which, if any, of the following give rise to assessable income? (Give reasons with your answer and where possible support your answer with case law):

1. Joe is a doctor and agrees to swap medical work valued at $1000 with Simone (who runs a camera shop) for a camera with a market value of $900 (but only cost Simone $600.)

2. A car valued at $20,000 given as a prize to Sally who is a customer of a bank. The competition was open to all those who were able to maintain a minimum balance of $10,000 for the year.

3. Sarah arranges to have a builder help her on weekends to erect her extension on her home. This is done on the basis that he can have a caravan (which cost Sarah, $12,000 on 1st January 2007) when the work is done. Assume the value of the builders work is $11,000 and the caravan has a market price of $13,000 when she hands it over on 1st January in the current income year.

4. Charmaine sells the story of her life on the run with her bank robber ex-husband Ned Kelly, to her local paper, "The Daily Bugle," for $25,000.

Case Study two

Deductions

Baz Baxter always wanted be a pilot but for the moment works as an air traffic controller at the local airport and is employed by the Department of Aviation. Baz holds a pilot's licence and during the current income year incurs $1500 expenses connected to keeping up flying hours necessary for the retention of his licence and $2,000 in obtaining a higher grade of licence.

There is no statutory or contractual requirement on controllers to obtain a flying licence and the holding of a pilot's licence and ongoing flight training are not essential prerequisites for promotion. However the Department of Aviation acknowledges that flying qualifications and experience help controllers to keep up to date with developments in their field and increase their knowledge and ability in their job.
Advise Baz whether he will be able to obtain a deduction for any or all of these expenses. In your answer refer to relevant case law.

Case study three

Capital gains tax

1. Brett borrowed $100,000 in the current income year to buy a block of land in his own name, intending to build a house for himself and his family. Before starting to build, he accepted an offer for the land of 250,000. Sale took place in May of the same income year. Interest expense was $2,000. Is there any assessable capital gain?

2. Cindy received an insurance payment of $40,000 for the loss of her BMW Sports car. The payment was received on 30th December in the current income year and the loss occurred on 29th December in the previous income year. The car was originally purchased for $24,000 on 1st May 1987 and was not used for income producing purposes. What are the capital gains implications?