Question 1
Amber owned and operated a boutique chocolate shop in Sydney that she purchased for $240,000 in August 2010. The purchase price consisted of equipment and stock worth $110,000 and the balance being goodwill. Following the birth of her child, Amber decided to sell the shop in February 2018 for $440,000 of which $280,000 was attributed to goodwill.
Amber was also required to sign a contract restricting her from opening another similar business within a 20km radius for the next 5 years. She received an additional sum of $50,000 for this contract.
Due to their expanding family, Amber and her husband purchased a four bedroom home in the outer suburbs of Sydney in June 2018. The purchase was partly funded by the sale of the business but also by the sale of Amber’s one bedroom inner-city apartment. Amber had lived in the apartment since she inherited it from her Uncle in October 2013. He had purchased it in September 1992 for $180,000 and lived in it until he died. At the time of his death the apartment was valued at $390,000. Amber signed a contract for the sale of the apartment in May 2018 for $550,000 and settlement took place in July 2018.
Required
Advise Amber of the taxation consequences of these transactions. You are not required to calculate any capital gains or losses. (20 marks)
Question 2
Jamie is a real estate agent working for ‘Houses R Us’ real estate. As part of his employment contract, Jamie receives a base salary of $50,000 per annum plus 10% of the agency’s commission on sold properties where he has had a direct connection with the sale. He is also provided with a car, a Toyota Kluger costing $48,000. He is not required to contribute to the running costs of the car which total $13,500 per year and is allowed to use the car outside of work hours and on weekends.
Jamie’s salary package also includes a laptop which cost $2,300 and a mobile phone costing $1,200 per year. His employer also reimburses his annual professional subscription of $550 and provides him with an entertainment allowance of $2,000 per year.
Jamie was also lucky enough to achieve the highest sales for the previous six month period and was rewarded with a high tech home entertainment system worth $4,800.
‘Houses R Us’ also offer their staff loans of up to $100,000 towards purchasing their own house at a rate of 4% per annum. Jamie is considering taking up this offer to purchase his first home.
Required
Advise Jamie and ‘Houses R Us’ of the taxation and FBT consequences of these transactions. You are not required to calculate any FBT liability.(15 marks)
Rationale
This assessment task will assess the following learning outcome/s:
- be able to identify and explain the rules of law relating to taxation law topics covered in the subject.
- be able demonstrate a capacity to engage in legal research.
- be able to use legal research skills to apply the law to legal problems relating to taxation so as to reach a solution.
- be able to analyse legal rules so as to differentiate between possible outcomes to the legal issues arising from novel fact situations.
note the following style guide
:
- Youshould use the ILAC style of essay writing for this assignment
- Do not re-state the question as part of your answer. This often gets repeated in the ‘issue’ section, however that is incorrect.
- Use in-text referencing. Do not use footnotes.
- Names of cases or statutes should be italicized, and followed by the jurisdiction not in italics, for example: Acts Interpretation Act 1901. Note the abbreviation for ‘Commonwealth’ is ‘Cth’ not ‘Cwlth’.
- Do not start a new line simply because you are starting a new sentence.
- Start each paragraph on a new line, and leave a clear line gap after the preceding paragraph. Don’t make your paragraphs too long.
- You must end your assignment with a bibliography that is divided into three separate parts, listing statutes, cases and books / articles / on-line Modules.
Requirements
Your answers to both the Problem Solving Questions in this Assessment task must be fully referenced. Referencing is the acknowledgement of information sources in your work; it is the appropriate way to give credit to the original owner of an idea, piece of writing or creative work. You will be required to use the APA style of referencing.
The answers should be confined to 3,500 words in total, bibliography excluded.
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