
MN506 System Management Assignment Help
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Issue
Law
Discussion
Joe provided its services to Simone and for the discharge of consideration Simone givers ist camera of $ 900 market value but cost of camera is $ 600. Since it is not ordinary course income therefore section 6-5 is not applicable. According to (Scott v. F C , 1966) for the calculation of the actual income or the assessable income of Simone, Section 70-90 will be applicable as he had sold his stock other than the normal course of business management. The cost which is incurred by Simone in earning this income will be taken as a deduction. The following statement shows the calculation of Simone’s income:
Particulars | Amount (in $) |
Assessable Value, as per section 70-90 | 900 |
Allowable deduction as per section 8-1 | 600 |
Income assessable for tax | 300 |
Conclusion
The assessable value on which Simone is required to pay the tax is supposed to be $ 900, after the deduction of $ 600 which he got as per section 8-1 the actual assessable value on which the final tax will be paid by him will be $ 300.
Issue
Law
In order to include this income in assessable income of tax payer following conditions must be fulfilled:
Application
Sally has won prize money by marinating account balance more than $ 10,000. This prize money does not constitute ordinary income for Sally and sally is not dependent on this money. This income has the characteristics of winfall gains and shall be liable to pay tax on. Therefore this income shall be included in assessable income of Sally.
Conclusion:
From the above points it can be concluded that prize money won by Sally shall be included in the assessable income of Sally as its fulfils conditions specified above.
Issue
Law
Discussion
As per the case of Sally she had not earned any normal or ordinary income from the ordinary business, but without any inclusion of cash she had increased the value of her assets as she has constructed a caravan. At preset the actual value of the asset is $ 13,000 and Sarah is purchasing the same at $ 12,000. Sarah will be the only person who will be using the said asset for his personal use and because of which arm length price will be calculated. There is also the concept of on cash benefits which will be applicable in this case. According to (Federal Commissioner of Taxation v. Cooke and Sherden, 1980) the calculation of assets will be done on the arm length rate i.e. market price of asset or the actual value of asset. The below provided statement is representing the calculation of capital gain or loss of Sarah:
Particulars | Cost (Building Work) in $ | Market Value in $ |
Value of Asset | 11,000 | 13,000 |
Cost of Asset | (12,000) | (12,000) |
Capital gain / loss | (1000) | 1000 |
Discount of 50% | Disregarded | (500) |
Capital Gain Tax | Nil | 500 |
Conclusion
Above calculated the capital gain payable by Sarah in this income year is calculated on the non cash basis will be $ 500. For the calculation of capital gain tax and for the purpose of calculating the value of the asset the use of arm length price is made. Here the discount of 50% is made because the value of asset is taken on the market value.
Issue:
Law
Section 6-5: An ordinary income is the one which is earned in the ordinary course of business but such income is not earned in ordinary course of business hence, will not be considered to be ordinary income.
This section deals with the calculation of capital gain that has taken place during the year. Capital gain also applicable on copyright that has been taken by Charmaine.
Discussion
Here the provisions of the section 6-5 of the income tax assessment act 1997 will be applied for ordinary income. According to the provision it is considered that if the content (Story) of the copyright is sold only for one time by the Charmaine then it will be considered as the ordinary income and will be included in the income of the Charmaine for the purpose of assessable income. According to (HEAVY MINERALS PTY. LTD. v. FEDERAL COMMISSIONER OF TAXATION, 1966) on the other hand if the income of $225,000 is treated as the capital asset then the provisions of the capital gain will be applied. This applicability of the provisions of capital gain will be made when the asset is treated as copyright for Charmaine. If there is any possibility of further sales of story, or when this selling is the one time selling, then the provisions of capital gain will not be applicable.
Conclusion
We can say that the nature of the income is required for the assessment i.e. in order to determine the correct source or head of income a proper care of the nature of the income is to be made. We have seen that there are two situations in the present case of Charmaine for the calculation of the assessable income. The income from the sale of story by Charmaine will be included in the assessable income only when such sale is made for one time. Only then this income will be included in the capital gain and the related provisions will be applicable only then.
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Issue
Law
Discussion:
Under this case, Baz Baxter whose ultimate goal is to become pilot because of which he is presently employed as an air traffic controller for some time at the local airport. As presently also Baz Baxter is working in the same industry he will be in touch of his ultimate goal. He had also incurred expenses in order to procure a pilot license and maintain the same. According to Finn’s case for betterment in the present working at the job he had incurred such expenses of $1500 which will be treated as his cost. As there is no such mandatory requirement by the employment to obtain a pilot license but such license will help him in betterment in the present service. In order to earn the assessable income of the year a general deduction of $1500 is available under section 8-1 (1). In order to get a higher grade in pilot license there is another expenses incurred of $ 2000. As this income is not incurred to earn assessable income, hence o direct deduction of such amount will be provided to Baz Baxter. For the promotion of employees under ruling T/R 92/8 such deduction is available. As per this case the tax payer had indulged himself in learning of such programmers that would enhance his skills ad ability to perform well in at his workplace. Now Baz Baxter can claim expenses of $ 2000 as he had fulfilled all the conditions as per the provision. A great help and support could be obtained by Baz Baxter through these activities in order to increase his experience in term of employment.
Conclusion
As per the provision so explained above about the deduction of expenses from the assessable income of Baz Baxter, expenses of $ 1500 is spent by him for maintaining the pilot licence which will be beneficial for him in the course of his working at the present employment which can also be said to be a support for him in the earning of the income during the income year. In addition to the above deduction there is one more deduction which is provided to him i.e. related to the enhancement of his employment skills which will be helpful to him in his future. Such deductions, as available under promotion ruling, are advantageous to the Baz Baxter for calculation of assessable income.
Issue
Law
Section 115-25: AS per the provisions of this section exemption from the payment of capital gain tax and for that some condition shall be fulfilled. This section had specified one condition for the exemption i.e. capital asset shall be 12 months old i.e. used or kept for at least 12 months. Capital assets shall be used in income generating activities for at least 12 months from the date of use.
Calculation of cost base includes following five elements:
Discussion
In this case Brett has borrowed money i.e. $ 100,000 for the acquisition of land but had sold piece of land in the same income year. Brett has not kept land for 12 months or more. Interest on borrowed money that Brett has to pay is of $ 2000. Main question arise in this case is of whether capital gain of earned by Brett shall be assessable or shall be included in his assessable income for the year and what deductions are available with him. Capital gain on the sale of land will be included in the assessable income. Since land is not retained for 12 or more months therefore no deduction or exemption is available i.e. of 50%. While on the other hand interest expenses on borrowed money will form part of cost of asset.
Conclusion
From the above points it can be concluded that deduction from capital gain income earned by Brett in the income year are not available for deduction of 50 % as he has not retained land (capital asset) for 12 or more months.
Issues
Law
Discussion
Cindy has received insurance claim from insurance company towards its damaged car in the current income year. Although destruction of car taken place in previous year. But as per section 104-20 of income tax assessment act 1997 compensation received from insurance company will be assessable in the year when it is received. Cindy has purchased car in 1st May 1987 therefore provision of section 104-20 will not be applicable. As per section 118-5 car is not treated as capital asset for the purpose of capital gain. As per the provisions of section 118-300 insurance claims received from general insurance company will be exempt from capital gain tax.
Conclusion
From above points and section discuses it can be concluded that car does not fulfill condition of being capital asset and shall be exempt from capital gain tax. While compensation received from genera insurance company will be expect from including in assessable income during the year. Therefore in this case Cindy shall be liable for the inclusion of insurance claim received from insurance company during the year.
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