ACCG 924 Session 2 2016 Case Study
Class: Friday 16:00-19:00
Name: Yueh-ting Lai
SID: 44755597
Dear manager:
It is my pleasure to conduct this research for our main client, Mrs. Gilling. The followings are suggestions according to the important facts you pointed out. Please let me know if any issues we could discuss further.
Regards!
Yuehting Lai
A. Entering into the agency contract
Issue: What is the tax consequences?
Conclusion: The contract is a CGT asset and the payment of $205,000 is capital expense to Bronx.
Analysis:
Even though the payment is paid to Bronx’s supplier and could be seen as an outflow from business to generate income under s8-1ITAA971, the aim of the payment is to maintain the advantage of being the unique agent; …show more content…
$16,600 paint $7,600
Total cost base $1,500+$16,600+$7,600 $1,524,200
G. Insurance payment and cost of hail damage
Issue: The insurance payment and cost of hail damage?
Conclusion: The payment of $85000 was a capital receipt.
Analysis:
Compensation receipt generally takes the character of what it replaces (Meek, 1915). In Mrs. Gilling’s case, the insurance only compensates the repair rather than the rent from Bronx nor structural work to the building. Since Mrs. Gilling rent the showroom for profit, the original character for repair and structural work are deduction (s8-1 ITAA97) and capital (s110-25(4) ITAA97). However, Mrs. Gilling only received $85000 and settled for a payment totaling $85000 to cover both the repairs and structural work to the building. Based on Mclaurin case (1961), the entire payment will be treated as a capital receipt and no part will be ordinary income.
H. Silvio staying in Australia permanently
Class: Friday 16:00-19:00
Name: Yueh-ting Lai
SID: 44755597
Dear manager:
It is my pleasure to conduct this research for our main client, Mrs. Gilling. The followings are suggestions according to the important facts you pointed out. Please let me know if any issues we could discuss further.
Regards!
Yuehting Lai
A. Entering into the agency contract
Issue: What is the tax consequences?
Conclusion: The contract is a CGT asset and the payment of $205,000 is capital expense to Bronx.
Analysis:
Even though the payment is paid to Bronx’s supplier and could be seen as an outflow from business to generate income under s8-1ITAA971, the aim of the payment is to maintain the advantage of being the unique agent; …show more content…
$16,600 paint $7,600
Total cost base $1,500+$16,600+$7,600 $1,524,200
G. Insurance payment and cost of hail damage
Issue: The insurance payment and cost of hail damage?
Conclusion: The payment of $85000 was a capital receipt.
Analysis:
Compensation receipt generally takes the character of what it replaces (Meek, 1915). In Mrs. Gilling’s case, the insurance only compensates the repair rather than the rent from Bronx nor structural work to the building. Since Mrs. Gilling rent the showroom for profit, the original character for repair and structural work are deduction (s8-1 ITAA97) and capital (s110-25(4) ITAA97). However, Mrs. Gilling only received $85000 and settled for a payment totaling $85000 to cover both the repairs and structural work to the building. Based on Mclaurin case (1961), the entire payment will be treated as a capital receipt and no part will be ordinary income.
H. Silvio staying in Australia permanently